Correlation Between Alpha Architect and Core Alternative

Can any of the company-specific risk be diversified away by investing in both Alpha Architect and Core Alternative 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 Core Alternative 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 Core Alternative ETF, you can compare the effects of market volatilities on Alpha Architect and Core Alternative 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 Core Alternative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha Architect and Core Alternative.

Diversification Opportunities for Alpha Architect and Core Alternative

0.64

Correlation Coefficient

Alpha Architect  Core Alternative

Poor diversification

The 3 months correlation between Alpha and Core is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Architect International and Core Alternative ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Alternative ETF 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 Core Alternative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Alternative ETF has no effect on the direction of Alpha Architect i.e., Alpha Architect and Core Alternative go up and down completely randomly.

Pair Corralation between Alpha Architect and Core Alternative

Given the investment horizon of 90 days Alpha Architect International is expected to generate 1.83 times more return on investment than Core Alternative. However, Alpha Architect is 1.83 times more volatile than Core Alternative ETF. It trades about -0.06 of its potential returns per unit of risk. Core Alternative ETF is currently generating about -0.17 per unit of risk. If you would invest  2,527  in Alpha Architect International on September 18, 2024 and sell it today you would lose (87.00) from holding Alpha Architect International or give up 3.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Alpha Architect International  vs.  Core Alternative ETF

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.

Core Alternative ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Core Alternative ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Core Alternative is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Alpha Architect and Core Alternative

The main advantage of trading using opposite Alpha Architect and Core Alternative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha Architect position performs unexpectedly, Core Alternative 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 Core Alternative will offset losses from the drop in Core Alternative's long position.

The idea behind Alpha Architect International and Core Alternative ETF 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.