Correlation Between Distillate Fundamental and ETF Series

Can any of the company-specific risk be diversified away by investing in both Distillate Fundamental 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 Distillate Fundamental and ETF Series into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Distillate Fundamental Stability and ETF Series Solutions, you can compare the effects of market volatilities on Distillate Fundamental 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 Distillate Fundamental with a short position of ETF Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Distillate Fundamental and ETF Series.

Diversification Opportunities for Distillate Fundamental and ETF Series

0.96

Correlation Coefficient

Distillate Fundamental  ETF Series

Almost no diversification

The 3 months correlation between Distillate and ETF is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Distillate Fundamental Stabili 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 Distillate Fundamental 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 Distillate Fundamental Stability 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 Distillate Fundamental i.e., Distillate Fundamental and ETF Series go up and down completely randomly.

Pair Corralation between Distillate Fundamental and ETF Series

Given the investment horizon of 90 days Distillate Fundamental is expected to generate 1.56 times less return on investment than ETF Series. But when comparing it to its historical volatility, Distillate Fundamental Stability is 1.54 times less risky than ETF Series. It trades about 0.14 of its potential returns per unit of risk. ETF Series Solutions is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,450  in ETF Series Solutions on September 1, 2024 and sell it today you would earn a total of  352.00  from holding ETF Series Solutions or generate 10.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Distillate Fundamental Stabili  vs.  ETF Series Solutions

Distillate Fundamental

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Distillate Fundamental Stability are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Distillate Fundamental may actually be approaching a critical reversion point that can send shares even higher in December 2024.

ETF Series Solutions

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETF Series Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting primary indicators, ETF Series may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Distillate Fundamental and ETF Series

The main advantage of trading using opposite Distillate Fundamental and ETF Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Distillate Fundamental 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.

The idea behind Distillate Fundamental Stability and ETF Series Solutions 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.