Correlation Between Alpha Architect and Global X
Can any of the company-specific risk be diversified away by investing in both Alpha Architect and Global X 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 Global X 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 Global X NASDAQ, you can compare the effects of market volatilities on Alpha Architect and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha Architect and Global X.
Diversification Opportunities for Alpha Architect and Global X
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Alpha and Global is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Architect International and Global X NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X NASDAQ 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X NASDAQ has no effect on the direction of Alpha Architect i.e., Alpha Architect and Global X go up and down completely randomly.
Pair Corralation between Alpha Architect and Global X
Given the investment horizon of 90 days Alpha Architect is expected to generate 4.42 times less return on investment than Global X. But when comparing it to its historical volatility, Alpha Architect International is 1.23 times less risky than Global X. It trades about 0.05 of its potential returns per unit of risk. Global X NASDAQ is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 3,163 in Global X NASDAQ on September 13, 2024 and sell it today you would earn a total of 105.50 from holding Global X NASDAQ or generate 3.34% 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. Global X NASDAQ
Performance |
| Timeline |
| Alpha Architect Inte |
| Global X NASDAQ |
Alpha Architect and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alpha Architect and Global X
The main advantage of trading using opposite Alpha Architect and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha Architect position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.| Alpha Architect vs. iShares MSCI Intl | Alpha Architect vs. iShares MSCI Intl | Alpha Architect vs. iShares Currency Hedged | Alpha Architect vs. iShares Edge MSCI |
| Global X vs. Alpha Architect Quantitative | Global X vs. Alpha Architect International | Global X vs. Alpha Architect International | Global X vs. Alpha Architect Quantitative |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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