Correlation Between ALPSSmith Balanced and Financial Investors

Can any of the company-specific risk be diversified away by investing in both ALPSSmith Balanced and Financial Investors 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 ALPSSmith Balanced and Financial Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ALPSSmith Balanced Opportunity and Financial Investors Trust, you can compare the effects of market volatilities on ALPSSmith Balanced and Financial Investors 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 ALPSSmith Balanced with a short position of Financial Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALPSSmith Balanced and Financial Investors.

Diversification Opportunities for ALPSSmith Balanced and Financial Investors

-0.36

Correlation Coefficient

ALPSSmith Balanced  Financial Investors

Very good diversification

The 3 months correlation between ALPSSmith and Financial is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding ALPSSmith Balanced Opportunity and Financial Investors Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Investors Trust and ALPSSmith Balanced 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 ALPSSmith Balanced Opportunity are associated (or correlated) with Financial Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Investors Trust has no effect on the direction of ALPSSmith Balanced i.e., ALPSSmith Balanced and Financial Investors go up and down completely randomly.

Pair Corralation between ALPSSmith Balanced and Financial Investors

Assuming the 90 days horizon ALPSSmith Balanced Opportunity is expected to generate 0.51 times more return on investment than Financial Investors. However, ALPSSmith Balanced Opportunity is 1.94 times less risky than Financial Investors. It trades about 0.19 of its potential returns per unit of risk. Financial Investors Trust is currently generating about 0.0 per unit of risk. If you would invest  1,294  in ALPSSmith Balanced Opportunity on September 5, 2024 and sell it today you would earn a total of  74.00  from holding ALPSSmith Balanced Opportunity or generate 5.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

ALPSSmith Balanced Opportunity  vs.  Financial Investors Trust

ALPSSmith Balanced

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ALPSSmith Balanced Opportunity are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, ALPSSmith Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Financial Investors Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Financial Investors Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Financial Investors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ALPSSmith Balanced and Financial Investors

The main advantage of trading using opposite ALPSSmith Balanced and Financial Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALPSSmith Balanced position performs unexpectedly, Financial Investors 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 Financial Investors will offset losses from the drop in Financial Investors' long position.

The idea behind ALPSSmith Balanced Opportunity and Financial Investors Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.