Correlation Between Alpha Architect and Simplify Exchange

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

Diversification Opportunities for Alpha Architect and Simplify Exchange

-0.64

Correlation Coefficient

Alpha Architect  Simplify Exchange

Excellent diversification

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

Pair Corralation between Alpha Architect and Simplify Exchange

Given the investment horizon of 90 days Alpha Architect International is expected to under-perform the Simplify Exchange. In addition to that, Alpha Architect is 2.26 times more volatile than Simplify Exchange Traded. It trades about -0.05 of its total potential returns per unit of risk. Simplify Exchange Traded is currently generating about 0.25 per unit of volatility. If you would invest  2,836  in Simplify Exchange Traded on September 17, 2024 and sell it today you would earn a total of  184.00  from holding Simplify Exchange Traded or generate 6.49% return on investment over 90 days.

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

Alpha Architect International  vs.  Simplify Exchange Traded

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.

Simplify Exchange Traded

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Exchange Traded are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Simplify Exchange is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alpha Architect and Simplify Exchange

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

The idea behind Alpha Architect International and Simplify Exchange Traded 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.