Correlation Between MicroSectors FANG and MicroSectors FANG
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and MicroSectors FANG 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 MicroSectors FANG 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 MicroSectors FANG ETN, you can compare the effects of market volatilities on MicroSectors FANG and MicroSectors FANG 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 MicroSectors FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and MicroSectors FANG.
Diversification Opportunities for MicroSectors FANG and MicroSectors FANG
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MicroSectors and MicroSectors is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and MicroSectors FANG ETN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG ETN 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 MicroSectors FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG ETN has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and MicroSectors FANG go up and down completely randomly.
Pair Corralation between MicroSectors FANG and MicroSectors FANG
Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the MicroSectors FANG. In addition to that, MicroSectors FANG is 1.99 times more volatile than MicroSectors FANG ETN. It trades about -0.15 of its total potential returns per unit of risk. MicroSectors FANG ETN is currently generating about -0.15 per unit of volatility. If you would invest 5,405 in MicroSectors FANG ETN on December 31, 2024 and sell it today you would lose (406.00) from holding MicroSectors FANG ETN or give up 7.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors FANG Index vs. MicroSectors FANG ETN
Performance |
| Timeline |
| MicroSectors FANG Index |
| MicroSectors FANG ETN |
MicroSectors FANG and MicroSectors FANG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and MicroSectors FANG
The main advantage of trading using opposite MicroSectors FANG and MicroSectors FANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, MicroSectors FANG 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 MicroSectors FANG will offset losses from the drop in MicroSectors FANG's long position.| MicroSectors FANG vs. MicroSectors FANG ETN | ||
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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