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 SP 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
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and Alpha is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Global X SP 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 SP 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
Given the investment horizon of 90 days Global X SP is expected to generate 0.36 times more return on investment than Alpha Architect. However, Global X SP is 2.76 times less risky than Alpha Architect. It trades about 0.32 of its potential returns per unit of risk. Alpha Architect Quantitative is currently generating about -0.06 per unit of risk. If you would invest 3,272 in Global X SP on September 19, 2024 and sell it today you would earn a total of 87.00 from holding Global X SP or generate 2.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X SP vs. Alpha Architect Quantitative
Performance |
| Timeline |
| Global X SP |
| 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 |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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