Correlation Between ETF Series and Manager Directed

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

Diversification Opportunities for ETF Series and Manager Directed

-0.58

Correlation Coefficient

ETF Series  Manager Directed

Excellent diversification

The 3 months correlation between ETF and Manager is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding ETF Series Solutions and Manager Directed Portfolios in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manager Directed Por 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 Manager Directed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manager Directed Por has no effect on the direction of ETF Series i.e., ETF Series and Manager Directed go up and down completely randomly.

Pair Corralation between ETF Series and Manager Directed

Given the investment horizon of 90 days ETF Series Solutions is expected to under-perform the Manager Directed. In addition to that, ETF Series is 27.95 times more volatile than Manager Directed Portfolios. It trades about -0.08 of its total potential returns per unit of risk. Manager Directed Portfolios is currently generating about 0.61 per unit of volatility. If you would invest  2,722  in Manager Directed Portfolios on December 28, 2024 and sell it today you would earn a total of  30.00  from holding Manager Directed Portfolios or generate 1.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

ETF Series Solutions  vs.  Manager Directed Portfolios

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. Despite somewhat strong basic indicators, ETF Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Manager Directed Por

Risk-Adjusted Performance

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Manager Directed Portfolios are ranked lower than 47 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Manager Directed is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ETF Series and Manager Directed

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

The idea behind ETF Series Solutions and Manager Directed Portfolios 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.