Correlation Between IShares Trust and Alpha Architect

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

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

Diversification Opportunities for IShares Trust and Alpha Architect

0.93

Correlation Coefficient

IShares Trust  Alpha Architect

Almost no diversification

The 3 months correlation between IShares and Alpha is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Alpha Architect High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Architect High and IShares Trust 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 Trust 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 High has no effect on the direction of IShares Trust i.e., IShares Trust and Alpha Architect go up and down completely randomly.

Pair Corralation between IShares Trust and Alpha Architect

Given the investment horizon of 90 days iShares Trust is expected to generate 2.9 times more return on investment than Alpha Architect. However, IShares Trust is 2.9 times more volatile than Alpha Architect High. It trades about 0.18 of its potential returns per unit of risk. Alpha Architect High is currently generating about 0.17 per unit of risk. If you would invest  3,327  in iShares Trust on July 20, 2025 and sell it today you would earn a total of  191.00  from holding iShares Trust or generate 5.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

iShares Trust  vs.  Alpha Architect High

iShares Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, IShares Trust is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Alpha Architect High

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Architect High are ranked lower than 13 (%) 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.

Pair Trading with IShares Trust and Alpha Architect

The main advantage of trading using opposite IShares Trust and Alpha Architect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust 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 iShares Trust and Alpha Architect High 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.