Correlation Between MicroSectors FANG and Innovator ETFs
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and Innovator ETFs 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 Innovator ETFs 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 Innovator ETFs Trust, you can compare the effects of market volatilities on MicroSectors FANG and Innovator ETFs 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 Innovator ETFs. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Innovator ETFs.
Diversification Opportunities for MicroSectors FANG and Innovator ETFs
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MicroSectors and Innovator is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Innovator ETFs Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator ETFs 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 Innovator ETFs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator ETFs Trust has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Innovator ETFs go up and down completely randomly.
Pair Corralation between MicroSectors FANG and Innovator ETFs
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 3.71 times more return on investment than Innovator ETFs. However, MicroSectors FANG is 3.71 times more volatile than Innovator ETFs Trust. It trades about 0.17 of its potential returns per unit of risk. Innovator ETFs Trust is currently generating about -0.25 per unit of risk. If you would invest 7,600 in MicroSectors FANG Index on August 27, 2024 and sell it today you would earn a total of 733.00 from holding MicroSectors FANG Index or generate 9.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors FANG Index vs. Innovator ETFs Trust
Performance |
| Timeline |
| MicroSectors FANG Index |
| Innovator ETFs Trust |
MicroSectors FANG and Innovator ETFs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and Innovator ETFs
The main advantage of trading using opposite MicroSectors FANG and Innovator ETFs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, Innovator ETFs 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 Innovator ETFs will offset losses from the drop in Innovator ETFs' long position.| MicroSectors FANG vs. Direxion Daily SP | MicroSectors FANG vs. Direxion Daily Semiconductor | MicroSectors FANG vs. Direxion Daily Semiconductor |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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