Correlation Between MicroSectors Gold and Alpha Architect

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

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

Diversification Opportunities for MicroSectors Gold and Alpha Architect

0.71

Correlation Coefficient

MicroSectors Gold  Alpha Architect

Poor diversification

The 3 months correlation between MicroSectors and Alpha is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Gold Miners and Alpha Architect Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Architect Global and MicroSectors Gold 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 MicroSectors Gold Miners 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 Global has no effect on the direction of MicroSectors Gold i.e., MicroSectors Gold and Alpha Architect go up and down completely randomly.

Pair Corralation between MicroSectors Gold and Alpha Architect

Given the investment horizon of 90 days MicroSectors Gold Miners is expected to generate 8.24 times more return on investment than Alpha Architect. However, MicroSectors Gold is 8.24 times more volatile than Alpha Architect Global. It trades about 0.14 of its potential returns per unit of risk. Alpha Architect Global is currently generating about 0.16 per unit of risk. If you would invest  6,826  in MicroSectors Gold Miners on May 28, 2025 and sell it today you would earn a total of  3,468  from holding MicroSectors Gold Miners or generate 50.81% return on investment over 90 days.

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

MicroSectors Gold Miners  vs.  Alpha Architect Global

MicroSectors Gold Miners

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Gold Miners are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MicroSectors Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

Alpha Architect Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Architect Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Alpha Architect may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with MicroSectors Gold and Alpha Architect

The main advantage of trading using opposite MicroSectors Gold and Alpha Architect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors Gold 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 MicroSectors Gold Miners and Alpha Architect Global 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.