Correlation Between Alpha Architect and STF Tactical
Can any of the company-specific risk be diversified away by investing in both Alpha Architect and STF Tactical 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 STF Tactical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alpha Architect Gdsdn and STF Tactical Growth, you can compare the effects of market volatilities on Alpha Architect and STF Tactical 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 STF Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha Architect and STF Tactical.
Diversification Opportunities for Alpha Architect and STF Tactical
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alpha and STF is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Architect Gdsdn and STF Tactical Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STF Tactical Growth 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 Gdsdn are associated (or correlated) with STF Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STF Tactical Growth has no effect on the direction of Alpha Architect i.e., Alpha Architect and STF Tactical go up and down completely randomly.
Pair Corralation between Alpha Architect and STF Tactical
Given the investment horizon of 90 days Alpha Architect is expected to generate 3.38 times less return on investment than STF Tactical. But when comparing it to its historical volatility, Alpha Architect Gdsdn is 2.34 times less risky than STF Tactical. It trades about 0.06 of its potential returns per unit of risk. STF Tactical Growth is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,401 in STF Tactical Growth on August 28, 2024 and sell it today you would earn a total of 69.00 from holding STF Tactical Growth or generate 2.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alpha Architect Gdsdn vs. STF Tactical Growth
Performance |
| Timeline |
| Alpha Architect Gdsdn |
| STF Tactical Growth |
Alpha Architect and STF Tactical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alpha Architect and STF Tactical
The main advantage of trading using opposite Alpha Architect and STF Tactical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha Architect position performs unexpectedly, STF Tactical 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 STF Tactical will offset losses from the drop in STF Tactical's long position.| Alpha Architect vs. Janus Henderson Mortgage Backed | Alpha Architect vs. LeaderSharesTM AlphaFactor Core | Alpha Architect vs. ClearShares Ultra Short Maturity | Alpha Architect vs. Hartford Short Duration |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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