Correlation Between ERShares Entrepreneurs and Alerian Energy

Can any of the company-specific risk be diversified away by investing in both ERShares Entrepreneurs and Alerian Energy 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 ERShares Entrepreneurs and Alerian Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ERShares Entrepreneurs ETF and Alerian Energy Infrastructure, you can compare the effects of market volatilities on ERShares Entrepreneurs and Alerian Energy 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 ERShares Entrepreneurs with a short position of Alerian Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of ERShares Entrepreneurs and Alerian Energy.

Diversification Opportunities for ERShares Entrepreneurs and Alerian Energy

-0.36

Correlation Coefficient

ERShares Entrepreneurs  Alerian Energy

Very good diversification

The 3 months correlation between ERShares and Alerian is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding ERShares Entrepreneurs ETF and Alerian Energy Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alerian Energy Infra and ERShares Entrepreneurs 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 ERShares Entrepreneurs ETF are associated (or correlated) with Alerian Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alerian Energy Infra has no effect on the direction of ERShares Entrepreneurs i.e., ERShares Entrepreneurs and Alerian Energy go up and down completely randomly.

Pair Corralation between ERShares Entrepreneurs and Alerian Energy

Given the investment horizon of 90 days ERShares Entrepreneurs ETF is expected to generate 1.55 times more return on investment than Alerian Energy. However, ERShares Entrepreneurs is 1.55 times more volatile than Alerian Energy Infrastructure. It trades about 0.09 of its potential returns per unit of risk. Alerian Energy Infrastructure is currently generating about 0.09 per unit of risk. If you would invest  930.00  in ERShares Entrepreneurs ETF on September 28, 2024 and sell it today you would earn a total of  617.00  from holding ERShares Entrepreneurs ETF or generate 66.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.97%
Values	Daily Returns

ERShares Entrepreneurs ETF  vs.  Alerian Energy Infrastructure

ERShares Entrepreneurs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ERShares Entrepreneurs ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, ERShares Entrepreneurs is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Alerian Energy Infra

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alerian Energy Infrastructure are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, Alerian Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ERShares Entrepreneurs and Alerian Energy

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

The idea behind ERShares Entrepreneurs ETF and Alerian Energy Infrastructure 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.