Correlation Between MicroSectors FANG and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and IShares MSCI 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 MSCI 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 MSCI EAFE, you can compare the effects of market volatilities on MicroSectors FANG and IShares MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and IShares MSCI.
Diversification Opportunities for MicroSectors FANG and IShares MSCI
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MicroSectors and IShares is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EAFE 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI EAFE has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and IShares MSCI go up and down completely randomly.
Pair Corralation between MicroSectors FANG and IShares MSCI
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 3.26 times more return on investment than IShares MSCI. However, MicroSectors FANG is 3.26 times more volatile than iShares MSCI EAFE. It trades about 0.18 of its potential returns per unit of risk. iShares MSCI EAFE is currently generating about -0.2 per unit of risk. If you would invest 7,499 in MicroSectors FANG Index on August 24, 2024 and sell it today you would earn a total of 790.00 from holding MicroSectors FANG Index or generate 10.53% 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. iShares MSCI EAFE
Performance |
| Timeline |
| MicroSectors FANG Index |
| iShares MSCI EAFE |
MicroSectors FANG and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and IShares MSCI
The main advantage of trading using opposite MicroSectors FANG and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, IShares MSCI 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 MSCI will offset losses from the drop in IShares MSCI's long position.| MicroSectors FANG vs. ProShares Ultra SP500 | MicroSectors FANG vs. ProShares Ultra QQQ | MicroSectors FANG vs. ProShares UltraPro SP500 | MicroSectors FANG vs. Direxion Daily Technology |
| IShares MSCI vs. iShares MSCI EAFE | IShares MSCI vs. iShares MSCI EAFE | IShares MSCI vs. iShares Russell Mid Cap | IShares MSCI vs. iShares MSCI Netherlands |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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