Correlation Between ETF Series and Cboe Validus

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

Diversification Opportunities for ETF Series and Cboe Validus

0.9

Correlation Coefficient

ETF Series  Cboe Validus

Almost no diversification

The 3 months correlation between ETF and Cboe is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding ETF Series Solutions and Cboe Validus SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cboe Validus SP 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 Cboe Validus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cboe Validus SP has no effect on the direction of ETF Series i.e., ETF Series and Cboe Validus go up and down completely randomly.

Pair Corralation between ETF Series and Cboe Validus

Given the investment horizon of 90 days ETF Series Solutions is expected to under-perform the Cboe Validus. In addition to that, ETF Series is 1.13 times more volatile than Cboe Validus SP. It trades about -0.12 of its total potential returns per unit of risk. Cboe Validus SP is currently generating about -0.03 per unit of volatility. If you would invest  2,072  in Cboe Validus SP on December 26, 2024 and sell it today you would lose (40.71) from holding Cboe Validus SP or give up 1.96% 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.  Cboe Validus SP

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 latest weak performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Cboe Validus SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cboe Validus SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cboe Validus is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ETF Series and Cboe Validus

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

The idea behind ETF Series Solutions and Cboe Validus SP 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.