Correlation Between Alpha Architect and Acquirers

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

By analyzing existing cross correlation between Alpha Architect Quantitative and The Acquirers, you can compare the effects of market volatilities on Alpha Architect and Acquirers 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 Acquirers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha Architect and Acquirers.

Diversification Opportunities for Alpha Architect and Acquirers

0.97

Correlation Coefficient

Alpha Architect  Acquirers

Almost no diversification

The 3 months correlation between Alpha and Acquirers is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Architect Quantitative and The Acquirers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acquirers 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 Quantitative are associated (or correlated) with Acquirers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acquirers has no effect on the direction of Alpha Architect i.e., Alpha Architect and Acquirers go up and down completely randomly.

Pair Corralation between Alpha Architect and Acquirers

Given the investment horizon of 90 days Alpha Architect Quantitative is expected to generate 0.89 times more return on investment than Acquirers. However, Alpha Architect Quantitative is 1.13 times less risky than Acquirers. It trades about -0.07 of its potential returns per unit of risk. The Acquirers is currently generating about -0.11 per unit of risk. If you would invest  4,441  in Alpha Architect Quantitative on December 29, 2024 and sell it today you would lose (195.00) from holding Alpha Architect Quantitative or give up 4.39% of portfolio value over 90 days.

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

Alpha Architect Quantitative  vs.  The Acquirers

Alpha Architect Quan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpha Architect Quantitative 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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Acquirers

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Acquirers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Pair Trading with Alpha Architect and Acquirers

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

The idea behind Alpha Architect Quantitative and The Acquirers 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.