Correlation Between Alpha Architect and Simplify Exchange

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

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

Diversification Opportunities for Alpha Architect and Simplify Exchange

0.68

Correlation Coefficient

Alpha Architect  Simplify Exchange

Poor diversification

The 3 months correlation between Alpha and Simplify is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Architect High and Simplify Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Exchange Traded and Alpha Architect 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 Alpha Architect High are associated (or correlated) with Simplify Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Exchange Traded has no effect on the direction of Alpha Architect i.e., Alpha Architect and Simplify Exchange go up and down completely randomly.

Pair Corralation between Alpha Architect and Simplify Exchange

Given the investment horizon of 90 days Alpha Architect High is expected to generate 0.68 times more return on investment than Simplify Exchange. However, Alpha Architect High is 1.48 times less risky than Simplify Exchange. It trades about 0.12 of its potential returns per unit of risk. Simplify Exchange Traded is currently generating about 0.06 per unit of risk. If you would invest  2,246  in Alpha Architect High on April 23, 2025 and sell it today you would earn a total of  38.00  from holding Alpha Architect High or generate 1.69% return on investment over 90 days.

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

Alpha Architect High  vs.  Simplify Exchange Traded

Alpha Architect High

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Architect High are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Alpha Architect is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Simplify Exchange Traded

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Exchange Traded are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Simplify Exchange is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alpha Architect and Simplify Exchange

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

The idea behind Alpha Architect High and Simplify Exchange Traded 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.