ETF1
and ETF2
, within the same sector, have a high Sortino ratio together.
Swapping ETF2
with ETF3
, a well-performing ETF that has diverse holdings (rather than holding stocks within the same industry sector as ETF1
), reduces the Sortino ratio considerably. The same applies to the Sharpe ratio too.
Which one would reduce diversifiable risk with ETF1? ETF2
within the same sector but a higher Sortino ratio or ETF3
with diversified holdings and a lower Sortino ratio?