Correlation Between ETF Series and Democracy International

Can any of the company-specific risk be diversified away by investing in both ETF Series and Democracy International 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 Democracy International 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 Democracy International, you can compare the effects of market volatilities on ETF Series and Democracy International 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 Democracy International. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETF Series and Democracy International.

Diversification Opportunities for ETF Series and Democracy International

0.95

Correlation Coefficient

ETF Series  Democracy International

Almost no diversification

The 3 months correlation between ETF and Democracy is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding ETF Series Solutions and Democracy International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Democracy International 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 Democracy International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Democracy International has no effect on the direction of ETF Series i.e., ETF Series and Democracy International go up and down completely randomly.

Pair Corralation between ETF Series and Democracy International

Given the investment horizon of 90 days ETF Series Solutions is expected to under-perform the Democracy International. But the etf apears to be less risky and, when comparing its historical volatility, ETF Series Solutions is 1.01 times less risky than Democracy International. The etf trades about -0.28 of its potential returns per unit of risk. The Democracy International is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest  2,593  in Democracy International on October 9, 2024 and sell it today you would lose (91.00) from holding Democracy International or give up 3.51% of portfolio value over 90 days.

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

ETF Series Solutions  vs.  Democracy International

ETF Series Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ETF Series Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Democracy International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Democracy International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Democracy International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ETF Series and Democracy International

The main advantage of trading using opposite ETF Series and Democracy International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETF Series position performs unexpectedly, Democracy International 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 Democracy International will offset losses from the drop in Democracy International's long position.

The idea behind ETF Series Solutions and Democracy International 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.