Correlation Between ClearShares OCIO and Alpha Architect

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

By analyzing existing cross correlation between ClearShares OCIO ETF and Alpha Architect Gdsdn, you can compare the effects of market volatilities on ClearShares OCIO and Alpha Architect 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 ClearShares OCIO with a short position of Alpha Architect. Check out your portfolio center. Please also check ongoing floating volatility patterns of ClearShares OCIO and Alpha Architect.

Diversification Opportunities for ClearShares OCIO and Alpha Architect

0.65

Correlation Coefficient

ClearShares OCIO  Alpha Architect

Poor diversification

The 3 months correlation between ClearShares and Alpha is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding ClearShares OCIO ETF and Alpha Architect Gdsdn in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Architect Gdsdn and ClearShares OCIO 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 ClearShares OCIO ETF are associated (or correlated) with Alpha Architect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Architect Gdsdn has no effect on the direction of ClearShares OCIO i.e., ClearShares OCIO and Alpha Architect go up and down completely randomly.

Pair Corralation between ClearShares OCIO and Alpha Architect

Given the investment horizon of 90 days ClearShares OCIO ETF is expected to under-perform the Alpha Architect. In addition to that, ClearShares OCIO is 1.61 times more volatile than Alpha Architect Gdsdn. It trades about -0.03 of its total potential returns per unit of risk. Alpha Architect Gdsdn is currently generating about 0.04 per unit of volatility. If you would invest  3,185  in Alpha Architect Gdsdn on December 27, 2024 and sell it today you would earn a total of  33.00  from holding Alpha Architect Gdsdn or generate 1.04% return on investment over 90 days.

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

ClearShares OCIO ETF  vs.  Alpha Architect Gdsdn

ClearShares OCIO ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days ClearShares OCIO ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, ClearShares OCIO is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Alpha Architect Gdsdn

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Architect Gdsdn are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Alpha Architect is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ClearShares OCIO and Alpha Architect

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

The idea behind ClearShares OCIO ETF and Alpha Architect Gdsdn 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.