Correlation Between Relative Sentiment and ETF Series

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

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

Diversification Opportunities for Relative Sentiment and ETF Series

0.03

Correlation Coefficient

Relative Sentiment  ETF Series

Significant diversification

The 3 months correlation between Relative and ETF is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Relative Sentiment Tactical 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 Relative Sentiment 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 Relative Sentiment Tactical 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 Relative Sentiment i.e., Relative Sentiment and ETF Series go up and down completely randomly.

Pair Corralation between Relative Sentiment and ETF Series

Given the investment horizon of 90 days Relative Sentiment Tactical is expected to generate 1.06 times more return on investment than ETF Series. However, Relative Sentiment is 1.06 times more volatile than ETF Series Solutions. It trades about 0.13 of its potential returns per unit of risk. ETF Series Solutions is currently generating about -0.06 per unit of risk. If you would invest  2,964  in Relative Sentiment Tactical on December 28, 2024 and sell it today you would earn a total of  145.00  from holding Relative Sentiment Tactical or generate 4.89% return on investment over 90 days.

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

Relative Sentiment Tactical  vs.  ETF Series Solutions

Relative Sentiment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Relative Sentiment Tactical are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Relative Sentiment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ETF Series Solutions

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Relative Sentiment and ETF Series

The main advantage of trading using opposite Relative Sentiment and ETF Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Relative Sentiment 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 Relative Sentiment Tactical 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 Stocks Directory module to find actively traded stocks across global markets.