Correlation Between MicroSectors Solactive and MicroSectors Gold
Can any of the company-specific risk be diversified away by investing in both MicroSectors Solactive and MicroSectors Gold 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 MicroSectors Solactive and MicroSectors Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors Solactive FANG and MicroSectors Gold Miners, you can compare the effects of market volatilities on MicroSectors Solactive and MicroSectors Gold 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 MicroSectors Solactive with a short position of MicroSectors Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors Solactive and MicroSectors Gold.
Diversification Opportunities for MicroSectors Solactive and MicroSectors Gold
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MicroSectors and MicroSectors is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Solactive FANG and MicroSectors Gold Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Gold Miners and MicroSectors Solactive 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 MicroSectors Solactive FANG are associated (or correlated) with MicroSectors Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Gold Miners has no effect on the direction of MicroSectors Solactive i.e., MicroSectors Solactive and MicroSectors Gold go up and down completely randomly.
Pair Corralation between MicroSectors Solactive and MicroSectors Gold
Given the investment horizon of 90 days MicroSectors Solactive FANG is expected to generate 0.96 times more return on investment than MicroSectors Gold. However, MicroSectors Solactive FANG is 1.05 times less risky than MicroSectors Gold. It trades about 0.03 of its potential returns per unit of risk. MicroSectors Gold Miners is currently generating about -0.22 per unit of risk. If you would invest 1,224 in MicroSectors Solactive FANG on October 22, 2024 and sell it today you would earn a total of 12.00 from holding MicroSectors Solactive FANG or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors Solactive FANG vs. MicroSectors Gold Miners
Performance |
| Timeline |
| MicroSectors Solactive |
| MicroSectors Gold Miners |
MicroSectors Solactive and MicroSectors Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors Solactive and MicroSectors Gold
The main advantage of trading using opposite MicroSectors Solactive and MicroSectors Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors Solactive position performs unexpectedly, MicroSectors Gold 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 MicroSectors Gold will offset losses from the drop in MicroSectors Gold's long position.| MicroSectors Solactive vs. Direxion Daily Dow | MicroSectors Solactive vs. MicroSectors Solactive FANG | MicroSectors Solactive vs. MicroSectors FANG Index |
| MicroSectors Gold vs. MicroSectors Gold Miners | MicroSectors Gold vs. MicroSectors Solactive FANG | MicroSectors Gold vs. Direxion Daily Dow |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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