Correlation Between Alpha Architect and Aptus Drawdown

Can any of the company-specific risk be diversified away by investing in both Alpha Architect and Aptus Drawdown at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Alpha Architect and Aptus Drawdown into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alpha Architect International and Aptus Drawdown Managed, you can compare the effects of market volatilities on Alpha Architect and Aptus Drawdown and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Alpha Architect with a short position of Aptus Drawdown. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha Architect and Aptus Drawdown.

Diversification Opportunities for Alpha Architect and Aptus Drawdown

-0.54

Correlation Coefficient

Alpha Architect  Aptus Drawdown

Excellent diversification

The 3 months correlation between Alpha and Aptus is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Architect International and Aptus Drawdown Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptus Drawdown Managed and Alpha Architect is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Alpha Architect International are associated (or correlated) with Aptus Drawdown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptus Drawdown Managed has no effect on the direction of Alpha Architect i.e., Alpha Architect and Aptus Drawdown go up and down completely randomly.

Pair Corralation between Alpha Architect and Aptus Drawdown

Given the investment horizon of 90 days Alpha Architect International is expected to under-perform the Aptus Drawdown. In addition to that, Alpha Architect is 1.46 times more volatile than Aptus Drawdown Managed. It trades about -0.05 of its total potential returns per unit of risk. Aptus Drawdown Managed is currently generating about 0.15 per unit of volatility. If you would invest  4,543  in Aptus Drawdown Managed on September 15, 2024 and sell it today you would earn a total of  270.00  from holding Aptus Drawdown Managed or generate 5.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Alpha Architect International  vs.  Aptus Drawdown Managed

Alpha Architect Inte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Architect International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Alpha Architect is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Aptus Drawdown Managed

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aptus Drawdown Managed are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Aptus Drawdown is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alpha Architect and Aptus Drawdown

The main advantage of trading using opposite Alpha Architect and Aptus Drawdown positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha Architect position performs unexpectedly, Aptus Drawdown can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Aptus Drawdown will offset losses from the drop in Aptus Drawdown's long position.

The idea behind Alpha Architect International and Aptus Drawdown Managed pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.