Correlation Between ALPS and AdvisorShares Hotel

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

By analyzing existing cross correlation between ALPS and AdvisorShares Hotel ETF, you can compare the effects of market volatilities on ALPS and AdvisorShares Hotel 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 ALPS with a short position of AdvisorShares Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALPS and AdvisorShares Hotel.

Diversification Opportunities for ALPS and AdvisorShares Hotel

0.74

Correlation Coefficient

ALPS  AdvisorShares Hotel

Poor diversification

The 3 months correlation between ALPS and AdvisorShares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ALPS and AdvisorShares Hotel ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Hotel ETF and ALPS 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 ALPS are associated (or correlated) with AdvisorShares Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Hotel ETF has no effect on the direction of ALPS i.e., ALPS and AdvisorShares Hotel go up and down completely randomly.

Pair Corralation between ALPS and AdvisorShares Hotel

Given the investment horizon of 90 days ALPS is expected to generate 2.1 times less return on investment than AdvisorShares Hotel. But when comparing it to its historical volatility, ALPS is 1.33 times less risky than AdvisorShares Hotel. It trades about 0.12 of its potential returns per unit of risk. AdvisorShares Hotel ETF is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,968  in AdvisorShares Hotel ETF on September 28, 2024 and sell it today you would earn a total of  397.00  from holding AdvisorShares Hotel ETF or generate 13.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	27.42%
Values	Daily Returns

ALPS  vs.  AdvisorShares Hotel ETF

ALPS

Risk-Adjusted Performance

0 of 100

OK

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

AdvisorShares Hotel ETF

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AdvisorShares Hotel ETF are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, AdvisorShares Hotel showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ALPS and AdvisorShares Hotel

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

The idea behind ALPS and AdvisorShares Hotel ETF 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.