Correlation Between ETF Series and Listed Funds
Can any of the company-specific risk be diversified away by investing in both ETF Series and Listed Funds 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 ETF Series and Listed Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETF Series Solutions and Listed Funds Trust, you can compare the effects of market volatilities on ETF Series and Listed Funds 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 ETF Series with a short position of Listed Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETF Series and Listed Funds.
Diversification Opportunities for ETF Series and Listed Funds
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ETF and Listed is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding ETF Series Solutions and Listed Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Listed Funds Trust and ETF Series 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 ETF Series Solutions are associated (or correlated) with Listed Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Listed Funds Trust has no effect on the direction of ETF Series i.e., ETF Series and Listed Funds go up and down completely randomly.
Pair Corralation between ETF Series and Listed Funds
Given the investment horizon of 90 days ETF Series Solutions is expected to generate 4.27 times more return on investment than Listed Funds. However, ETF Series is 4.27 times more volatile than Listed Funds Trust. It trades about 0.08 of its potential returns per unit of risk. Listed Funds Trust is currently generating about 0.06 per unit of risk. If you would invest 2,376 in ETF Series Solutions on September 3, 2024 and sell it today you would earn a total of 1,580 from holding ETF Series Solutions or generate 66.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETF Series Solutions vs. Listed Funds Trust
Performance |
| Timeline |
| ETF Series Solutions |
| Listed Funds Trust |
ETF Series and Listed Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETF Series and Listed Funds
The main advantage of trading using opposite ETF Series and Listed Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETF Series position performs unexpectedly, Listed Funds 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 Listed Funds will offset losses from the drop in Listed Funds' long position.| ETF Series vs. Vanguard Information Technology | ETF Series vs. Technology Select Sector | ETF Series vs. iShares Technology ETF | ETF Series vs. VanEck Semiconductor ETF |
| Listed Funds vs. Vanguard Industrials Index | Listed Funds vs. Vanguard Consumer Discretionary | Listed Funds vs. Vanguard Materials Index | Listed Funds vs. Vanguard Health Care |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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