Correlation Between MicroSectors FANG and Invesco FTSE
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and Invesco FTSE 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 Invesco FTSE 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 Invesco FTSE RAFI, you can compare the effects of market volatilities on MicroSectors FANG and Invesco FTSE 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 Invesco FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Invesco FTSE.
Diversification Opportunities for MicroSectors FANG and Invesco FTSE
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MicroSectors and Invesco is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Invesco FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE RAFI 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 Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE RAFI has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Invesco FTSE go up and down completely randomly.
Pair Corralation between MicroSectors FANG and Invesco FTSE
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 3.46 times more return on investment than Invesco FTSE. However, MicroSectors FANG is 3.46 times more volatile than Invesco FTSE RAFI. It trades about 0.09 of its potential returns per unit of risk. Invesco FTSE RAFI is currently generating about 0.04 per unit of risk. If you would invest 3,524 in MicroSectors FANG Index on August 31, 2024 and sell it today you would earn a total of 4,795 from holding MicroSectors FANG Index or generate 136.07% 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. Invesco FTSE RAFI
Performance |
| Timeline |
| MicroSectors FANG Index |
| Invesco FTSE RAFI |
MicroSectors FANG and Invesco FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and Invesco FTSE
The main advantage of trading using opposite MicroSectors FANG and Invesco FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, Invesco FTSE 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 Invesco FTSE will offset losses from the drop in Invesco FTSE'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 |
| Invesco FTSE vs. Invesco FTSE RAFI | Invesco FTSE vs. Invesco FTSE RAFI | Invesco FTSE vs. Invesco FTSE RAFI | Invesco FTSE vs. Invesco DWA Developed |
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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