Correlation Between Global X and Alpha Architect
Can any of the company-specific risk be diversified away by investing in both Global X 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 Global X and Alpha Architect into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X NASDAQ and Alpha Architect Quantitative, you can compare the effects of market volatilities on Global X 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 Global X with a short position of Alpha Architect. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Alpha Architect.
Diversification Opportunities for Global X and Alpha Architect
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Global and Alpha is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Global X NASDAQ and Alpha Architect Quantitative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Architect Quan and Global X 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 Global X NASDAQ 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 Quan has no effect on the direction of Global X i.e., Global X and Alpha Architect go up and down completely randomly.
Pair Corralation between Global X and Alpha Architect
Considering the 90-day investment horizon Global X is expected to generate 1.37 times less return on investment than Alpha Architect. But when comparing it to its historical volatility, Global X NASDAQ is 1.31 times less risky than Alpha Architect. It trades about 0.09 of its potential returns per unit of risk. Alpha Architect Quantitative is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,636 in Alpha Architect Quantitative on September 12, 2024 and sell it today you would earn a total of 2,137 from holding Alpha Architect Quantitative or generate 46.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X NASDAQ vs. Alpha Architect Quantitative
Performance |
| Timeline |
| Global X NASDAQ |
| Alpha Architect Quan |
Global X and Alpha Architect Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and Alpha Architect
The main advantage of trading using opposite Global X and Alpha Architect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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.| Global X vs. Alpha Architect Quantitative | Global X vs. Alpha Architect International | Global X vs. Alpha Architect International | Global X vs. Alpha Architect Quantitative |
| Alpha Architect vs. Vanguard Mid Cap Growth | Alpha Architect vs. iShares Russell Mid Cap | Alpha Architect vs. ARK Innovation ETF | Alpha Architect vs. iShares SP Mid Cap |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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