Correlation Between Interactive Brokers and Alpha Architect

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

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

Diversification Opportunities for Interactive Brokers and Alpha Architect

0.88

Correlation Coefficient

Interactive Brokers  Alpha Architect

Very poor diversification

The 3 months correlation between Interactive and Alpha is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Interactive Brokers Group and Alpha Architect Gdsdn in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Architect Gdsdn and Interactive Brokers 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 Interactive Brokers Group 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 Gdsdn has no effect on the direction of Interactive Brokers i.e., Interactive Brokers and Alpha Architect go up and down completely randomly.

Pair Corralation between Interactive Brokers and Alpha Architect

Given the investment horizon of 90 days Interactive Brokers Group is expected to generate 3.05 times more return on investment than Alpha Architect. However, Interactive Brokers is 3.05 times more volatile than Alpha Architect Gdsdn. It trades about 0.06 of its potential returns per unit of risk. Alpha Architect Gdsdn is currently generating about -0.22 per unit of risk. If you would invest  10,880  in Interactive Brokers Group on January 20, 2024 and sell it today you would earn a total of  180.00  from holding Interactive Brokers Group or generate 1.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Interactive Brokers Group  vs.  Alpha Architect Gdsdn

Interactive Brokers

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Interactive Brokers Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward-looking signals, Interactive Brokers reported solid returns over the last few months and may actually be approaching a breakup point.

Alpha Architect Gdsdn

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Architect Gdsdn are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Alpha Architect is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Interactive Brokers and Alpha Architect

The main advantage of trading using opposite Interactive Brokers and Alpha Architect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Interactive Brokers 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 Interactive Brokers Group and Alpha Architect Gdsdn 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.