Correlation Between MicroSectors Solactive and MicroSectors FANG
Can any of the company-specific risk be diversified away by investing in both MicroSectors Solactive and MicroSectors FANG 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 FANG 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 FANG Index, you can compare the effects of market volatilities on MicroSectors Solactive and MicroSectors FANG 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 FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors Solactive and MicroSectors FANG.
Diversification Opportunities for MicroSectors Solactive and MicroSectors FANG
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between MicroSectors and MicroSectors is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Solactive FANG and MicroSectors FANG Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG Index 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 FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG Index has no effect on the direction of MicroSectors Solactive i.e., MicroSectors Solactive and MicroSectors FANG go up and down completely randomly.
Pair Corralation between MicroSectors Solactive and MicroSectors FANG
Given the investment horizon of 90 days MicroSectors Solactive is expected to generate 1.47 times less return on investment than MicroSectors FANG. In addition to that, MicroSectors Solactive is 1.08 times more volatile than MicroSectors FANG Index. It trades about 0.1 of its total potential returns per unit of risk. MicroSectors FANG Index is currently generating about 0.16 per unit of volatility. If you would invest 44,959 in MicroSectors FANG Index on August 27, 2024 and sell it today you would earn a total of 5,941 from holding MicroSectors FANG Index or generate 13.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors Solactive FANG vs. MicroSectors FANG Index
Performance |
| Timeline |
| MicroSectors Solactive |
| MicroSectors FANG Index |
MicroSectors Solactive and MicroSectors FANG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors Solactive and MicroSectors FANG
The main advantage of trading using opposite MicroSectors Solactive and MicroSectors FANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors Solactive position performs unexpectedly, MicroSectors FANG 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 FANG will offset losses from the drop in MicroSectors FANG's long position.| MicroSectors Solactive vs. MicroSectors FANG Index | MicroSectors Solactive vs. Direxion Daily Dow | MicroSectors Solactive vs. Direxion Daily Semiconductor |
| MicroSectors FANG vs. Direxion Daily SP | MicroSectors FANG vs. Direxion Daily Semiconductor | MicroSectors FANG vs. Direxion Daily Semiconductor |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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