Correlation Between ETF Series and Distillate Fundamental

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

Diversification Opportunities for ETF Series and Distillate Fundamental

0.45

Correlation Coefficient

ETF Series  Distillate Fundamental

Very weak diversification

The 3 months correlation between ETF and Distillate is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding ETF Series Solutions and Distillate Fundamental Stabili in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distillate Fundamental 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 Distillate Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distillate Fundamental has no effect on the direction of ETF Series i.e., ETF Series and Distillate Fundamental go up and down completely randomly.

Pair Corralation between ETF Series and Distillate Fundamental

Given the investment horizon of 90 days ETF Series Solutions is expected to generate 1.03 times more return on investment than Distillate Fundamental. However, ETF Series is 1.03 times more volatile than Distillate Fundamental Stability. It trades about 0.16 of its potential returns per unit of risk. Distillate Fundamental Stability is currently generating about -0.1 per unit of risk. If you would invest  2,367  in ETF Series Solutions on November 28, 2024 and sell it today you would earn a total of  160.00  from holding ETF Series Solutions or generate 6.76% 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.  Distillate Fundamental Stabili

ETF Series Solutions

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETF Series Solutions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, ETF Series may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Distillate Fundamental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Distillate Fundamental Stability has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Distillate Fundamental is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ETF Series and Distillate Fundamental

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

The idea behind ETF Series Solutions and Distillate Fundamental Stability 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.