Correlation Between EA Series and Alpha Architect
Can any of the company-specific risk be diversified away by investing in both EA Series 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 EA Series and Alpha Architect into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EA Series Trust and Alpha Architect High, you can compare the effects of market volatilities on EA Series 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 EA Series with a short position of Alpha Architect. Check out your portfolio center. Please also check ongoing floating volatility patterns of EA Series and Alpha Architect.
Diversification Opportunities for EA Series and Alpha Architect
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CAOS and Alpha is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding EA Series Trust and Alpha Architect High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Architect High and EA Series 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 EA Series Trust 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 High has no effect on the direction of EA Series i.e., EA Series and Alpha Architect go up and down completely randomly.
Pair Corralation between EA Series and Alpha Architect
Given the investment horizon of 90 days EA Series Trust is expected to generate 0.79 times more return on investment than Alpha Architect. However, EA Series Trust is 1.26 times less risky than Alpha Architect. It trades about 0.1 of its potential returns per unit of risk. Alpha Architect High is currently generating about 0.04 per unit of risk. If you would invest 8,178 in EA Series Trust on September 3, 2024 and sell it today you would earn a total of 535.00 from holding EA Series Trust or generate 6.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EA Series Trust vs. Alpha Architect High
Performance |
| Timeline |
| EA Series Trust |
| Alpha Architect High |
EA Series and Alpha Architect Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EA Series and Alpha Architect
The main advantage of trading using opposite EA Series and Alpha Architect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EA Series 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 EA Series Trust and Alpha Architect High 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.| Alpha Architect vs. Aptus Defined Risk | Alpha Architect vs. Discipline Fund ETF | Alpha Architect vs. WisdomTree Japan Hedged | Alpha Architect vs. Franklin FTSE Japan |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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