Correlation Between STF Tactical and Alpha Architect

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

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

Diversification Opportunities for STF Tactical and Alpha Architect

0.85

Correlation Coefficient

STF Tactical  Alpha Architect

Very poor diversification

The 3 months correlation between STF and Alpha is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding STF Tactical Growth 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 STF Tactical 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 STF Tactical Growth 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 STF Tactical i.e., STF Tactical and Alpha Architect go up and down completely randomly.

Pair Corralation between STF Tactical and Alpha Architect

Considering the 90-day investment horizon STF Tactical Growth is expected to generate 2.34 times more return on investment than Alpha Architect. However, STF Tactical is 2.34 times more volatile than Alpha Architect Gdsdn. It trades about 0.11 of its potential returns per unit of risk. Alpha Architect Gdsdn is currently generating about 0.04 per unit of risk. If you would invest  2,140  in STF Tactical Growth on September 13, 2024 and sell it today you would earn a total of  1,470  from holding STF Tactical Growth or generate 68.69% return on investment over 90 days.

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

STF Tactical Growth  vs.  Alpha Architect Gdsdn

STF Tactical Growth

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in STF Tactical Growth are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, STF Tactical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alpha Architect Gdsdn

Risk-Adjusted Performance

2 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Architect Gdsdn are ranked lower than 2 (%) 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 STF Tactical and Alpha Architect

The main advantage of trading using opposite STF Tactical and Alpha Architect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STF Tactical 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 STF Tactical Growth 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..