Correlation Between Energy Select and Exchange Traded

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

By analyzing existing cross correlation between Energy Select Sector and Exchange Traded Concepts, you can compare the effects of market volatilities on Energy Select and Exchange Traded 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 Energy Select with a short position of Exchange Traded. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Select and Exchange Traded.

Diversification Opportunities for Energy Select and Exchange Traded

0.57

Correlation Coefficient

Energy Select  Exchange Traded

Very weak diversification

The 3 months correlation between Energy and Exchange is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Energy Select Sector and Exchange Traded Concepts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Traded Concepts and Energy Select 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 Energy Select Sector are associated (or correlated) with Exchange Traded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Traded Concepts has no effect on the direction of Energy Select i.e., Energy Select and Exchange Traded go up and down completely randomly.

Pair Corralation between Energy Select and Exchange Traded

Considering the 90-day investment horizon Energy Select Sector is expected to generate 1.0 times more return on investment than Exchange Traded. However, Energy Select Sector is 1.0 times less risky than Exchange Traded. It trades about 0.14 of its potential returns per unit of risk. Exchange Traded Concepts is currently generating about 0.02 per unit of risk. If you would invest  8,390  in Energy Select Sector on December 29, 2024 and sell it today you would earn a total of  897.00  from holding Energy Select Sector or generate 10.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Energy Select Sector  vs.  Exchange Traded Concepts

Energy Select Sector

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Select Sector are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Energy Select may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Exchange Traded Concepts

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Traded Concepts are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Exchange Traded is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Energy Select and Exchange Traded

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

The idea behind Energy Select Sector and Exchange Traded Concepts 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.