Correlation Between Exchange Listed and ETF Series
Can any of the company-specific risk be diversified away by investing in both Exchange Listed and ETF Series 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 Exchange Listed and ETF Series into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exchange Listed Funds and ETF Series Solutions, you can compare the effects of market volatilities on Exchange Listed and ETF Series 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 Exchange Listed with a short position of ETF Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exchange Listed and ETF Series.
Diversification Opportunities for Exchange Listed and ETF Series
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Exchange and ETF is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Exchange Listed Funds and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions and Exchange Listed 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 Exchange Listed Funds are associated (or correlated) with ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of Exchange Listed i.e., Exchange Listed and ETF Series go up and down completely randomly.
Pair Corralation between Exchange Listed and ETF Series
Given the investment horizon of 90 days Exchange Listed is expected to generate 1.48 times less return on investment than ETF Series. But when comparing it to its historical volatility, Exchange Listed Funds is 1.61 times less risky than ETF Series. It trades about 0.31 of its potential returns per unit of risk. ETF Series Solutions is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 2,964 in ETF Series Solutions on August 30, 2024 and sell it today you would earn a total of 214.00 from holding ETF Series Solutions or generate 7.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exchange Listed Funds vs. ETF Series Solutions
Performance |
| Timeline |
| Exchange Listed Funds |
| ETF Series Solutions |
Exchange Listed and ETF Series Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exchange Listed and ETF Series
The main advantage of trading using opposite Exchange Listed and ETF Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exchange Listed position performs unexpectedly, ETF Series 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 ETF Series will offset losses from the drop in ETF Series' long position.| Exchange Listed vs. ETC 6 Meridian | Exchange Listed vs. 6 Meridian Mega | Exchange Listed vs. Tidal ETF Trust | Exchange Listed vs. 6 Meridian Low |
| ETF Series vs. AAM Low Duration | ETF Series vs. 6 Meridian Low | ETF Series vs. Exchange Listed Funds | ETF Series vs. 6 Meridian Mega |
Check out your portfolio center.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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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