Correlation Between MicroSectors FANG and IShares Short
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and IShares Short 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 IShares Short 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 iShares Short Maturity, you can compare the effects of market volatilities on MicroSectors FANG and IShares Short 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 IShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and IShares Short.
Diversification Opportunities for MicroSectors FANG and IShares Short
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between MicroSectors and IShares is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and iShares Short Maturity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Short Maturity 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 IShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Short Maturity has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and IShares Short go up and down completely randomly.
Pair Corralation between MicroSectors FANG and IShares Short
Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the IShares Short. In addition to that, MicroSectors FANG is 68.4 times more volatile than iShares Short Maturity. It trades about -0.18 of its total potential returns per unit of risk. iShares Short Maturity is currently generating about 0.17 per unit of volatility. If you would invest 4,993 in iShares Short Maturity on September 3, 2024 and sell it today you would earn a total of 35.00 from holding iShares Short Maturity or generate 0.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 35.94% |
| Values | Daily Returns |
MicroSectors FANG Index vs. iShares Short Maturity
Performance |
| Timeline |
| MicroSectors FANG Index |
| iShares Short Maturity |
MicroSectors FANG and IShares Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and IShares Short
The main advantage of trading using opposite MicroSectors FANG and IShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, IShares Short 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 IShares Short will offset losses from the drop in IShares Short'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 |
| IShares Short vs. iShares Treasury Floating | IShares Short vs. iShares Short Term National | IShares Short vs. iShares Short Maturity | IShares Short vs. iShares Interest Rate |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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