Correlation Between Energy Select and Listed Funds
Can any of the company-specific risk be diversified away by investing in both Energy Select 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 Energy Select and Listed Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Select Sector and Listed Funds Trust, you can compare the effects of market volatilities on Energy Select 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 Energy Select with a short position of Listed Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Select and Listed Funds.
Diversification Opportunities for Energy Select and Listed Funds
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Energy and Listed is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Energy Select Sector 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 Energy Select 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 Energy Select Sector 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 Energy Select i.e., Energy Select and Listed Funds go up and down completely randomly.
Pair Corralation between Energy Select and Listed Funds
Considering the 90-day investment horizon Energy Select Sector is expected to generate 1.31 times more return on investment than Listed Funds. However, Energy Select is 1.31 times more volatile than Listed Funds Trust. It trades about 0.03 of its potential returns per unit of risk. Listed Funds Trust is currently generating about 0.04 per unit of risk. If you would invest 8,170 in Energy Select Sector on September 1, 2024 and sell it today you would earn a total of 1,383 from holding Energy Select Sector or generate 16.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 66.59% |
| Values | Daily Returns |
Energy Select Sector vs. Listed Funds Trust
Performance |
| Timeline |
| Energy Select Sector |
| Listed Funds Trust |
Energy Select and Listed Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Select and Listed Funds
The main advantage of trading using opposite Energy Select and Listed Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Select 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.| Energy Select vs. Financial Select Sector | Energy Select vs. Health Care Select | Energy Select vs. Technology Select Sector | Energy Select vs. Utilities Select Sector |
| Listed Funds vs. First Trust Exchange Traded | Listed Funds vs. Ultimus Managers Trust | Listed Funds vs. Horizon Kinetics Medical | Listed Funds vs. Harbor 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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