Correlation Between IShares SP and AlphaMark Actively

Can any of the company-specific risk be diversified away by investing in both IShares SP and AlphaMark Actively 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 IShares SP and AlphaMark Actively into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares SP Small Cap and AlphaMark Actively Managed, you can compare the effects of market volatilities on IShares SP and AlphaMark Actively 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 IShares SP with a short position of AlphaMark Actively. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and AlphaMark Actively.

Diversification Opportunities for IShares SP and AlphaMark Actively

-0.06

Correlation Coefficient

IShares SP  AlphaMark Actively

Good diversification

The 3 months correlation between IShares and AlphaMark is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Small Cap and AlphaMark Actively Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AlphaMark Actively and IShares SP 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 iShares SP Small Cap are associated (or correlated) with AlphaMark Actively. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AlphaMark Actively has no effect on the direction of IShares SP i.e., IShares SP and AlphaMark Actively go up and down completely randomly.

Pair Corralation between IShares SP and AlphaMark Actively

Considering the 90-day investment horizon iShares SP Small Cap is expected to under-perform the AlphaMark Actively. But the etf apears to be less risky and, when comparing its historical volatility, iShares SP Small Cap is 173.09 times less risky than AlphaMark Actively. The etf trades about -0.32 of its potential returns per unit of risk. The AlphaMark Actively Managed is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  313.00  in AlphaMark Actively Managed on October 1, 2024 and sell it today you would earn a total of  3,017  from holding AlphaMark Actively Managed or generate 963.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

iShares SP Small Cap  vs.  AlphaMark Actively Managed

iShares SP Small

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP Small Cap are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking indicators, IShares SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

AlphaMark Actively

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AlphaMark Actively Managed are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent fundamental indicators, AlphaMark Actively reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares SP and AlphaMark Actively

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

The idea behind iShares SP Small Cap and AlphaMark Actively Managed 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.