Correlation Between Alpha Architect and ProShares UltraShort

Can any of the company-specific risk be diversified away by investing in both Alpha Architect and ProShares UltraShort 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 ProShares UltraShort 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 ProShares UltraShort Gold, you can compare the effects of market volatilities on Alpha Architect and ProShares UltraShort 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 ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha Architect and ProShares UltraShort.

Diversification Opportunities for Alpha Architect and ProShares UltraShort

-0.47

Correlation Coefficient

Alpha Architect  ProShares UltraShort

Very good diversification

The 3 months correlation between Alpha and ProShares is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Architect High and ProShares UltraShort Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort Gold 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 ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort Gold has no effect on the direction of Alpha Architect i.e., Alpha Architect and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Alpha Architect and ProShares UltraShort

Given the investment horizon of 90 days Alpha Architect High is expected to generate 0.1 times more return on investment than ProShares UltraShort. However, Alpha Architect High is 10.44 times less risky than ProShares UltraShort. It trades about 0.1 of its potential returns per unit of risk. ProShares UltraShort Gold is currently generating about -0.01 per unit of risk. If you would invest  2,254  in Alpha Architect High on April 24, 2025 and sell it today you would earn a total of  33.00  from holding Alpha Architect High or generate 1.46% return on investment over 90 days.

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

Alpha Architect High  vs.  ProShares UltraShort Gold

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 7 (%) 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.

ProShares UltraShort Gold

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Alpha Architect and ProShares UltraShort

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

The idea behind Alpha Architect High and ProShares UltraShort Gold 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.