Correlation Between ALPSSmith Credit and DEUTSCHE MID

Can any of the company-specific risk be diversified away by investing in both ALPSSmith Credit and DEUTSCHE MID 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 DEUTSCHE MID 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 DEUTSCHE MID CAP, you can compare the effects of market volatilities on ALPSSmith Credit and DEUTSCHE MID 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 DEUTSCHE MID. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALPSSmith Credit and DEUTSCHE MID.

Diversification Opportunities for ALPSSmith Credit and DEUTSCHE MID

0.93

Correlation Coefficient

ALPSSmith Credit  DEUTSCHE MID

Almost no diversification

The 3 months correlation between ALPSSmith and DEUTSCHE is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding ALPSSmith Credit Opportunities and DEUTSCHE MID CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DEUTSCHE MID CAP 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 DEUTSCHE MID. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DEUTSCHE MID CAP has no effect on the direction of ALPSSmith Credit i.e., ALPSSmith Credit and DEUTSCHE MID go up and down completely randomly.

Pair Corralation between ALPSSmith Credit and DEUTSCHE MID

Assuming the 90 days horizon ALPSSmith Credit Opportunities is expected to generate 0.99 times more return on investment than DEUTSCHE MID. However, ALPSSmith Credit Opportunities is 1.02 times less risky than DEUTSCHE MID. It trades about 0.08 of its potential returns per unit of risk. DEUTSCHE MID CAP is currently generating about 0.06 per unit of risk. If you would invest  824.00  in ALPSSmith Credit Opportunities on October 3, 2024 and sell it today you would earn a total of  91.00  from holding ALPSSmith Credit Opportunities or generate 11.04% return on investment over 90 days.

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

ALPSSmith Credit Opportunities  vs.  DEUTSCHE MID CAP

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.

DEUTSCHE MID CAP

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ALPSSmith Credit and DEUTSCHE MID

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

The idea behind ALPSSmith Credit Opportunities and DEUTSCHE MID CAP 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.