Correlation Between MicroSectors FANG and Absolute Core
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and Absolute Core 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 FANG and Absolute Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors FANG Index and Absolute Core Strategy, you can compare the effects of market volatilities on MicroSectors FANG and Absolute Core 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 FANG with a short position of Absolute Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Absolute Core.
Diversification Opportunities for MicroSectors FANG and Absolute Core
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MicroSectors and Absolute is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Absolute Core Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Core Strategy and MicroSectors FANG 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 FANG Index are associated (or correlated) with Absolute Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Core Strategy has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Absolute Core go up and down completely randomly.
Pair Corralation between MicroSectors FANG and Absolute Core
Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the Absolute Core. In addition to that, MicroSectors FANG is 8.47 times more volatile than Absolute Core Strategy. It trades about -0.11 of its total potential returns per unit of risk. Absolute Core Strategy is currently generating about 0.07 per unit of volatility. If you would invest 2,725 in Absolute Core Strategy on September 4, 2024 and sell it today you would earn a total of 588.00 from holding Absolute Core Strategy or generate 21.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors FANG Index vs. Absolute Core Strategy
Performance |
| Timeline |
| MicroSectors FANG Index |
| Absolute Core Strategy |
MicroSectors FANG and Absolute Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and Absolute Core
The main advantage of trading using opposite MicroSectors FANG and Absolute Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, Absolute Core 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 Absolute Core will offset losses from the drop in Absolute Core's long position.| MicroSectors FANG vs. MicroSectors FANG Index | MicroSectors FANG vs. Direxion Daily Semiconductor | MicroSectors FANG vs. Direxion Daily Technology | MicroSectors FANG vs. Direxion Daily SP |
| Absolute Core vs. Anfield Equity Sector | Absolute Core vs. AdvisorShares Dorsey Wright | Absolute Core vs. First Trust Active | Absolute Core vs. Aptus Collared Income |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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