Correlation Between ALPS and Financial Investors

Can any of the company-specific risk be diversified away by investing in both ALPS and Financial Investors 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 ALPS and Financial Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ALPS and Financial Investors Trust, you can compare the effects of market volatilities on ALPS and Financial Investors 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 ALPS with a short position of Financial Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALPS and Financial Investors.

Diversification Opportunities for ALPS and Financial Investors

-0.68

Correlation Coefficient

ALPS  Financial Investors

Excellent diversification

The 3 months correlation between ALPS and Financial is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding ALPS and Financial Investors Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Investors Trust and ALPS 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 ALPS are associated (or correlated) with Financial Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Investors Trust has no effect on the direction of ALPS i.e., ALPS and Financial Investors go up and down completely randomly.

Pair Corralation between ALPS and Financial Investors

Given the investment horizon of 90 days ALPS is expected to generate 1.14 times more return on investment than Financial Investors. However, ALPS is 1.14 times more volatile than Financial Investors Trust. It trades about 0.04 of its potential returns per unit of risk. Financial Investors Trust is currently generating about 0.02 per unit of risk. If you would invest  2,198  in ALPS on October 3, 2024 and sell it today you would earn a total of  391.00  from holding ALPS or generate 17.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.3%
Values	Daily Returns

ALPS  vs.  Financial Investors Trust

ALPS

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days ALPS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, ALPS showed solid returns over the last few months and may actually be approaching a breakup point.

Financial Investors Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Financial Investors Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with ALPS and Financial Investors

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

The idea behind ALPS and Financial Investors Trust 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.