Correlation Between Alpha Architect and FlexShares ESG

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

By analyzing existing cross correlation between Alpha Architect Quantitative and FlexShares ESG Climate, you can compare the effects of market volatilities on Alpha Architect and FlexShares ESG 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 FlexShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha Architect and FlexShares ESG.

Diversification Opportunities for Alpha Architect and FlexShares ESG

0.81

Correlation Coefficient

Alpha Architect  FlexShares ESG

Very poor diversification

The 3 months correlation between Alpha and FlexShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Architect Quantitative and FlexShares ESG Climate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares ESG Climate 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 Quantitative are associated (or correlated) with FlexShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares ESG Climate has no effect on the direction of Alpha Architect i.e., Alpha Architect and FlexShares ESG go up and down completely randomly.

Pair Corralation between Alpha Architect and FlexShares ESG

Given the investment horizon of 90 days Alpha Architect Quantitative is expected to generate 2.64 times more return on investment than FlexShares ESG. However, Alpha Architect is 2.64 times more volatile than FlexShares ESG Climate. It trades about 0.1 of its potential returns per unit of risk. FlexShares ESG Climate is currently generating about 0.17 per unit of risk. If you would invest  5,985  in Alpha Architect Quantitative on May 5, 2025 and sell it today you would earn a total of  304.00  from holding Alpha Architect Quantitative or generate 5.08% return on investment over 90 days.

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

Alpha Architect Quantitative  vs.  FlexShares ESG Climate

Alpha Architect Quan

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Architect Quantitative are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Alpha Architect is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

FlexShares ESG Climate

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares ESG Climate are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, FlexShares ESG is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alpha Architect and FlexShares ESG

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

The idea behind Alpha Architect Quantitative and FlexShares ESG Climate 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.