Correlation Between MicroSectors FANG and 2023 ETF
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and 2023 ETF 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 2023 ETF 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 The 2023 ETF, you can compare the effects of market volatilities on MicroSectors FANG and 2023 ETF 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 2023 ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and 2023 ETF.
Diversification Opportunities for MicroSectors FANG and 2023 ETF
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MicroSectors and 2023 is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and The 2023 ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 2023 ETF 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 2023 ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 2023 ETF has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and 2023 ETF go up and down completely randomly.
Pair Corralation between MicroSectors FANG and 2023 ETF
Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the 2023 ETF. In addition to that, MicroSectors FANG is 4.26 times more volatile than The 2023 ETF. It trades about -0.08 of its total potential returns per unit of risk. The 2023 ETF is currently generating about -0.26 per unit of volatility. If you would invest 2,491 in The 2023 ETF on September 1, 2024 and sell it today you would lose (164.00) from holding The 2023 ETF or give up 6.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 12.77% |
| Values | Daily Returns |
MicroSectors FANG Index vs. The 2023 ETF
Performance |
| Timeline |
| MicroSectors FANG Index |
| 2023 ETF |
MicroSectors FANG and 2023 ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and 2023 ETF
The main advantage of trading using opposite MicroSectors FANG and 2023 ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, 2023 ETF 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 2023 ETF will offset losses from the drop in 2023 ETF'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 |
| 2023 ETF vs. Schwab Fundamental Small | 2023 ETF vs. Schwab Fundamental Large | 2023 ETF vs. Schwab Fundamental International | 2023 ETF vs. Schwab Fundamental Emerging |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |