Correlation Between MicroSectors FANG and IShares Trust
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and IShares Trust 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 Trust 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 Trust, you can compare the effects of market volatilities on MicroSectors FANG and IShares Trust 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 Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and IShares Trust.
Diversification Opportunities for MicroSectors FANG and IShares Trust
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between MicroSectors and IShares is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and IShares Trust go up and down completely randomly.
Pair Corralation between MicroSectors FANG and IShares Trust
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 11.76 times more return on investment than IShares Trust. However, MicroSectors FANG is 11.76 times more volatile than iShares Trust. It trades about 0.11 of its potential returns per unit of risk. iShares Trust is currently generating about 0.09 per unit of risk. If you would invest 2,150 in MicroSectors FANG Index on November 2, 2024 and sell it today you would earn a total of 7,555 from holding MicroSectors FANG Index or generate 351.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 69.03% |
| Values | Daily Returns |
MicroSectors FANG Index vs. iShares Trust
Performance |
| Timeline |
| MicroSectors FANG Index |
| iShares Trust |
MicroSectors FANG and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and IShares Trust
The main advantage of trading using opposite MicroSectors FANG and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, IShares Trust 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 Trust will offset losses from the drop in IShares Trust'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 |
| IShares Trust vs. Vanguard Short Term Inflation Protected | IShares Trust vs. iShares TIPS Bond | IShares Trust vs. Invesco PureBeta 0 5 | IShares Trust vs. Goldman Sachs Access |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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