Correlation Between Alpha Architect and Distillate Fundamental

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

Diversification Opportunities for Alpha Architect and Distillate Fundamental

0.58

Correlation Coefficient

Alpha Architect  Distillate Fundamental

Very weak diversification

The 3 months correlation between Alpha and Distillate is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Architect Quantitative and Distillate Fundamental Stabili in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distillate Fundamental 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 Distillate Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distillate Fundamental has no effect on the direction of Alpha Architect i.e., Alpha Architect and Distillate Fundamental go up and down completely randomly.

Pair Corralation between Alpha Architect and Distillate Fundamental

Given the investment horizon of 90 days Alpha Architect is expected to generate 5.62 times less return on investment than Distillate Fundamental. In addition to that, Alpha Architect is 1.12 times more volatile than Distillate Fundamental Stability. It trades about 0.01 of its total potential returns per unit of risk. Distillate Fundamental Stability is currently generating about 0.09 per unit of volatility. If you would invest  5,401  in Distillate Fundamental Stability on May 15, 2025 and sell it today you would earn a total of  267.00  from holding Distillate Fundamental Stability or generate 4.94% return on investment over 90 days.

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

Alpha Architect Quantitative  vs.  Distillate Fundamental Stabili

Alpha Architect Quan

Risk-Adjusted Performance

Weakest

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Architect Quantitative are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Alpha Architect is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Distillate Fundamental

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Distillate Fundamental Stability are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Distillate Fundamental is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Alpha Architect and Distillate Fundamental

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

The idea behind Alpha Architect Quantitative and Distillate Fundamental Stability 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.