Correlation Between MicroSectors FANG and ProShares Short
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and ProShares 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 ProShares 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 ProShares Short 7 10, you can compare the effects of market volatilities on MicroSectors FANG and ProShares 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 ProShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and ProShares Short.
Diversification Opportunities for MicroSectors FANG and ProShares Short
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MicroSectors and ProShares is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and ProShares Short 7 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short 7 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 ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short 7 has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and ProShares Short go up and down completely randomly.
Pair Corralation between MicroSectors FANG and ProShares Short
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 12.38 times more return on investment than ProShares Short. However, MicroSectors FANG is 12.38 times more volatile than ProShares Short 7 10. It trades about 0.22 of its potential returns per unit of risk. ProShares Short 7 10 is currently generating about -0.27 per unit of risk. If you would invest 1,240 in MicroSectors FANG Index on December 4, 2024 and sell it today you would earn a total of 269.00 from holding MicroSectors FANG Index or generate 21.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
MicroSectors FANG Index vs. ProShares Short 7 10
Performance |
| Timeline |
| MicroSectors FANG Index |
| ProShares Short 7 |
MicroSectors FANG and ProShares Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and ProShares Short
The main advantage of trading using opposite MicroSectors FANG and ProShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, ProShares 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 ProShares Short will offset losses from the drop in ProShares Short's long position.| MicroSectors FANG vs. MicroSectors FANG Index | ||
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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