Correlation Between FT Vest and Alpha Architect

Can any of the company-specific risk be diversified away by investing in both FT Vest 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 FT Vest and Alpha Architect into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FT Vest Equity and Alpha Architect International, you can compare the effects of market volatilities on FT Vest 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 FT Vest with a short position of Alpha Architect. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Vest and Alpha Architect.

Diversification Opportunities for FT Vest and Alpha Architect

0.47

Correlation Coefficient

FT Vest  Alpha Architect

Very weak diversification

The 3 months correlation between DHDG and Alpha is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding FT Vest Equity and Alpha Architect International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Architect Inte and FT Vest 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 FT Vest Equity 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 Inte has no effect on the direction of FT Vest i.e., FT Vest and Alpha Architect go up and down completely randomly.

Pair Corralation between FT Vest and Alpha Architect

Given the investment horizon of 90 days FT Vest Equity is expected to generate 0.41 times more return on investment than Alpha Architect. However, FT Vest Equity is 2.42 times less risky than Alpha Architect. It trades about 0.17 of its potential returns per unit of risk. Alpha Architect International is currently generating about -0.01 per unit of risk. If you would invest  3,038  in FT Vest Equity on September 12, 2024 and sell it today you would earn a total of  68.00  from holding FT Vest Equity or generate 2.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	57.14%
Values	Daily Returns

FT Vest Equity  vs.  Alpha Architect International

FT Vest Equity

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FT Vest Equity are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, FT Vest is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Alpha Architect Inte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Architect International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Alpha Architect is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with FT Vest and Alpha Architect

The main advantage of trading using opposite FT Vest and Alpha Architect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT Vest 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.

The idea behind FT Vest Equity and Alpha Architect International 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.