Correlation Between Discipline Fund and Aptus Defined

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Can any of the company-specific risk be diversified away by investing in both Discipline Fund and Aptus Defined 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 Discipline Fund and Aptus Defined into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Discipline Fund ETF and Aptus Defined Risk, you can compare the effects of market volatilities on Discipline Fund and Aptus Defined 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 Discipline Fund with a short position of Aptus Defined. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discipline Fund and Aptus Defined.

Diversification Opportunities for Discipline Fund and Aptus Defined

0.79
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Discipline Fund and Aptus Defined

Given the investment horizon of 90 days Discipline Fund ETF is expected to under-perform the Aptus Defined. But the etf apears to be less risky and, when comparing its historical volatility, Discipline Fund ETF is 1.13 times less risky than Aptus Defined. The etf trades about -0.32 of its potential returns per unit of risk. The Aptus Defined Risk is currently generating about -0.26 of returns per unit of risk over similar time horizon. If you would invest  2,649  in Aptus Defined Risk on January 20, 2024 and sell it today you would lose (66.00) from holding Aptus Defined Risk or give up 2.49% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Discipline Fund ETF  vs.  Aptus Defined Risk

 Performance 
       Timeline  
Discipline Fund ETF 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Aptus Defined Risk 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
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 and Aptus Defined Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Discipline Fund and Aptus Defined

The main advantage of trading using opposite Discipline Fund and Aptus Defined positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discipline Fund position performs unexpectedly, Aptus Defined 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 Aptus Defined will offset losses from the drop in Aptus Defined's long position.
The idea behind Discipline Fund ETF and Aptus Defined Risk 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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