Correlation Between Alpha Architect and LHA Market
Can any of the company-specific risk be diversified away by investing in both Alpha Architect and LHA Market 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 LHA Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alpha Architect International and LHA Market State, you can compare the effects of market volatilities on Alpha Architect and LHA Market 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 LHA Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha Architect and LHA Market.
Diversification Opportunities for Alpha Architect and LHA Market
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Alpha and LHA is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Architect International and LHA Market State in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LHA Market State 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 International are associated (or correlated) with LHA Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LHA Market State has no effect on the direction of Alpha Architect i.e., Alpha Architect and LHA Market go up and down completely randomly.
Pair Corralation between Alpha Architect and LHA Market
Given the investment horizon of 90 days Alpha Architect is expected to generate 1.41 times less return on investment than LHA Market. In addition to that, Alpha Architect is 1.28 times more volatile than LHA Market State. It trades about 0.06 of its total potential returns per unit of risk. LHA Market State is currently generating about 0.1 per unit of volatility. If you would invest 2,199 in LHA Market State on September 2, 2024 and sell it today you would earn a total of 29.00 from holding LHA Market State or generate 1.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alpha Architect International vs. LHA Market State
Performance |
| Timeline |
| Alpha Architect Inte |
| LHA Market State |
Alpha Architect and LHA Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alpha Architect and LHA Market
The main advantage of trading using opposite Alpha Architect and LHA Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha Architect position performs unexpectedly, LHA Market 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 LHA Market will offset losses from the drop in LHA Market's long position.| Alpha Architect vs. Alpha Architect Quantitative | Alpha Architect vs. Alpha Architect International | Alpha Architect vs. Alpha Architect Quantitative | Alpha Architect vs. Alpha Architect Value |
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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