Correlation Between MicroSectors FANG and T Rex
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and T Rex 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 T Rex 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 T Rex 2X Inverse, you can compare the effects of market volatilities on MicroSectors FANG and T Rex 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 T Rex. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and T Rex.
Diversification Opportunities for MicroSectors FANG and T Rex
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MicroSectors and ETQ is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and T Rex 2X Inverse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rex 2X 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 T Rex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rex 2X has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and T Rex go up and down completely randomly.
Pair Corralation between MicroSectors FANG and T Rex
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 0.44 times more return on investment than T Rex. However, MicroSectors FANG Index is 2.25 times less risky than T Rex. It trades about 0.13 of its potential returns per unit of risk. T Rex 2X Inverse is currently generating about 0.0 per unit of risk. If you would invest 9,207 in MicroSectors FANG Index on October 9, 2024 and sell it today you would earn a total of 672.00 from holding MicroSectors FANG Index or generate 7.3% 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. T Rex 2X Inverse
Performance |
| Timeline |
| MicroSectors FANG Index |
| T Rex 2X |
MicroSectors FANG and T Rex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and T Rex
The main advantage of trading using opposite MicroSectors FANG and T Rex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, T Rex 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 T Rex will offset losses from the drop in T Rex's long position.| MicroSectors FANG vs. MicroSectors FANG ETN | MicroSectors FANG vs. Direxion Daily Dow | MicroSectors FANG vs. MicroSectors FANG Index | MicroSectors FANG vs. Direxion Daily Cnsmr |
| T Rex vs. Invesco DB Dollar | T Rex vs. iPath Series B | T Rex vs. ProShares VIX Short Term | T Rex vs. ProShares VIX Mid Term |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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