Correlation Between Reality Shares and Listed Funds

Can any of the company-specific risk be diversified away by investing in both Reality Shares and Listed Funds 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 Reality Shares and Listed Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Reality Shares DIVS and Listed Funds Trust, you can compare the effects of market volatilities on Reality Shares and Listed Funds 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 Reality Shares with a short position of Listed Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reality Shares and Listed Funds.

Diversification Opportunities for Reality Shares and Listed Funds

0.73

Correlation Coefficient

Reality Shares  Listed Funds

Poor diversification

The 3 months correlation between Reality and Listed is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Reality Shares DIVS and Listed Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Listed Funds Trust and Reality Shares 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 Reality Shares DIVS are associated (or correlated) with Listed Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Listed Funds Trust has no effect on the direction of Reality Shares i.e., Reality Shares and Listed Funds go up and down completely randomly.

Pair Corralation between Reality Shares and Listed Funds

Given the investment horizon of 90 days Reality Shares DIVS is expected to under-perform the Listed Funds. In addition to that, Reality Shares is 1.11 times more volatile than Listed Funds Trust. It trades about -0.15 of its total potential returns per unit of risk. Listed Funds Trust is currently generating about -0.02 per unit of volatility. If you would invest  2,969  in Listed Funds Trust on February 7, 2024 and sell it today you would lose (10.00) from holding Listed Funds Trust or give up 0.34% of portfolio value over 90 days.

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

Reality Shares DIVS  vs.  Listed Funds Trust

Reality Shares DIVS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Reality Shares DIVS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Reality Shares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Listed Funds Trust

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Listed Funds Trust are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Listed Funds may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Reality Shares and Listed Funds

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

The idea behind Reality Shares DIVS and Listed Funds Trust 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.