Correlation Between ETF Series and Aris Water

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

Diversification Opportunities for ETF Series and Aris Water

0.9

Correlation Coefficient

ETF Series  Aris Water

Almost no diversification

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

Pair Corralation between ETF Series and Aris Water

Given the investment horizon of 90 days ETF Series is expected to generate 29.4 times less return on investment than Aris Water. But when comparing it to its historical volatility, ETF Series Solutions is 47.53 times less risky than Aris Water. It trades about 0.28 of its potential returns per unit of risk. Aris Water Solutions is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,656  in Aris Water Solutions on September 16, 2024 and sell it today you would earn a total of  925.00  from holding Aris Water Solutions or generate 55.86% return on investment over 90 days.

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

ETF Series Solutions  vs.  Aris Water Solutions

ETF Series Solutions

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ETF Series Solutions are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, ETF Series is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Aris Water Solutions

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aris Water Solutions are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Aris Water unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ETF Series and Aris Water

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

The idea behind ETF Series Solutions and Aris Water 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.