Correlation Between MicroSectors FANG and VanEck Steel
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and VanEck Steel 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 VanEck Steel 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 VanEck Steel ETF, you can compare the effects of market volatilities on MicroSectors FANG and VanEck Steel 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 VanEck Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and VanEck Steel.
Diversification Opportunities for MicroSectors FANG and VanEck Steel
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MicroSectors and VanEck is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and VanEck Steel ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Steel ETF 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 VanEck Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Steel ETF has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and VanEck Steel go up and down completely randomly.
Pair Corralation between MicroSectors FANG and VanEck Steel
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 2.36 times more return on investment than VanEck Steel. However, MicroSectors FANG is 2.36 times more volatile than VanEck Steel ETF. It trades about 0.11 of its potential returns per unit of risk. VanEck Steel ETF is currently generating about -0.01 per unit of risk. If you would invest 4,586 in MicroSectors FANG Index on November 9, 2024 and sell it today you would earn a total of 5,449 from holding MicroSectors FANG Index or generate 118.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors FANG Index vs. VanEck Steel ETF
Performance |
| Timeline |
| MicroSectors FANG Index |
| VanEck Steel ETF |
MicroSectors FANG and VanEck Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and VanEck Steel
The main advantage of trading using opposite MicroSectors FANG and VanEck Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, VanEck Steel 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 VanEck Steel will offset losses from the drop in VanEck Steel'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 |
| VanEck Steel vs. SPDR SP Metals | VanEck Steel vs. VanEck Agribusiness ETF | VanEck Steel vs. Invesco DB Base | VanEck Steel vs. Invesco DB Agriculture |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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