Correlation Between MicroSectors FANG and Columbia Emerging
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and Columbia Emerging 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 Columbia Emerging 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 Columbia Emerging Markets, you can compare the effects of market volatilities on MicroSectors FANG and Columbia Emerging 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 Columbia Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Columbia Emerging.
Diversification Opportunities for MicroSectors FANG and Columbia Emerging
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MicroSectors and Columbia is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Columbia Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Emerging Markets 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 Columbia Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Emerging Markets has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Columbia Emerging go up and down completely randomly.
Pair Corralation between MicroSectors FANG and Columbia Emerging
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 3.44 times more return on investment than Columbia Emerging. However, MicroSectors FANG is 3.44 times more volatile than Columbia Emerging Markets. It trades about 0.25 of its potential returns per unit of risk. Columbia Emerging Markets is currently generating about 0.05 per unit of risk. If you would invest 8,486 in MicroSectors FANG Index on September 14, 2024 and sell it today you would earn a total of 1,116 from holding MicroSectors FANG Index or generate 13.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors FANG Index vs. Columbia Emerging Markets
Performance |
| Timeline |
| MicroSectors FANG Index |
| Columbia Emerging Markets |
MicroSectors FANG and Columbia Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and Columbia Emerging
The main advantage of trading using opposite MicroSectors FANG and Columbia Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, Columbia Emerging 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 Columbia Emerging will offset losses from the drop in Columbia Emerging's long position.| MicroSectors FANG vs. ProShares Ultra SP500 | MicroSectors FANG vs. Direxion Daily SP | MicroSectors FANG vs. Direxion Daily SP | MicroSectors FANG vs. MicroSectors FANG Index |
| Columbia Emerging vs. SPDR SP Emerging | Columbia Emerging vs. WisdomTree Emerging Markets | Columbia Emerging vs. WisdomTree Emerging Markets | Columbia Emerging vs. SPDR SP 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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