Correlation Between Aptus Defined and Discipline Fund

Can any of the company-specific risk be diversified away by investing in both Aptus Defined and Discipline Fund 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 Aptus Defined and Discipline Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aptus Defined Risk and Discipline Fund ETF, you can compare the effects of market volatilities on Aptus Defined and Discipline Fund 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 Aptus Defined with a short position of Discipline Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aptus Defined and Discipline Fund.

Diversification Opportunities for Aptus Defined and Discipline Fund

0.79

Correlation Coefficient

Aptus Defined  Discipline Fund

Poor diversification

The 3 months correlation between Aptus and Discipline is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Aptus Defined Risk and Discipline Fund ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discipline Fund ETF and Aptus Defined 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 Aptus Defined Risk are associated (or correlated) with Discipline Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discipline Fund ETF has no effect on the direction of Aptus Defined i.e., Aptus Defined and Discipline Fund go up and down completely randomly.

Pair Corralation between Aptus Defined and Discipline Fund

Given the investment horizon of 90 days Aptus Defined Risk is expected to generate 1.2 times more return on investment than Discipline Fund. However, Aptus Defined is 1.2 times more volatile than Discipline Fund ETF. It trades about 0.21 of its potential returns per unit of risk. Discipline Fund ETF is currently generating about 0.13 per unit of risk. If you would invest  2,261  in Aptus Defined Risk on January 20, 2024 and sell it today you would earn a total of  325.00  from holding Aptus Defined Risk or generate 14.37% return on investment over 90 days.

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

Aptus Defined Risk  vs.  Discipline Fund ETF

Aptus Defined Risk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aptus Defined Risk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Aptus Defined is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Discipline Fund ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Discipline Fund ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Discipline Fund is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Aptus Defined and Discipline Fund

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

The idea behind Aptus Defined Risk and Discipline Fund ETF 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.