Correlation Between ALPSSmith Credit and ALPS

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

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

Diversification Opportunities for ALPSSmith Credit and ALPS

0.08

Correlation Coefficient

ALPSSmith Credit  ALPS

Significant diversification

The 3 months correlation between ALPSSmith and ALPS is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding ALPSSmith Credit Opportunities and ALPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS and ALPSSmith Credit 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 ALPSSmith Credit Opportunities are associated (or correlated) with ALPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS has no effect on the direction of ALPSSmith Credit i.e., ALPSSmith Credit and ALPS go up and down completely randomly.

Pair Corralation between ALPSSmith Credit and ALPS

Assuming the 90 days horizon ALPSSmith Credit is expected to generate 3.34 times less return on investment than ALPS. But when comparing it to its historical volatility, ALPSSmith Credit Opportunities is 3.58 times less risky than ALPS. It trades about 0.08 of its potential returns per unit of risk. ALPS is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,236  in ALPS on October 3, 2024 and sell it today you would earn a total of  208.00  from holding ALPS or generate 9.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	26.67%
Values	Daily Returns

ALPSSmith Credit Opportunities  vs.  ALPS

ALPSSmith Credit Opp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALPSSmith Credit Opportunities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ALPSSmith Credit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ALPS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALPS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, ALPS is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ALPSSmith Credit and ALPS

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

The idea behind ALPSSmith Credit Opportunities and ALPS 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.