Correlation Between Alpha Architect and Exchange Traded

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

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

Diversification Opportunities for Alpha Architect and Exchange Traded

0.56

Correlation Coefficient

Alpha Architect  Exchange Traded

Very weak diversification

The 3 months correlation between Alpha and Exchange is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Architect Value and Exchange Traded Concepts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Traded Concepts 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 Value are associated (or correlated) with Exchange Traded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Traded Concepts has no effect on the direction of Alpha Architect i.e., Alpha Architect and Exchange Traded go up and down completely randomly.

Pair Corralation between Alpha Architect and Exchange Traded

If you would invest  2,580  in Alpha Architect Value on September 18, 2024 and sell it today you would earn a total of  76.00  from holding Alpha Architect Value or generate 2.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Alpha Architect Value  vs.  Exchange Traded Concepts

Alpha Architect Value

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Architect Value are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Alpha Architect is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Exchange Traded Concepts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exchange Traded Concepts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Exchange Traded is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alpha Architect and Exchange Traded

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

The idea behind Alpha Architect Value and Exchange Traded Concepts 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.