Correlation Between MicroSectors FANG and IQ MacKay
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and IQ MacKay 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 IQ MacKay into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors FANG ETN and IQ MacKay Municipal, you can compare the effects of market volatilities on MicroSectors FANG and IQ MacKay 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 IQ MacKay. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and IQ MacKay.
Diversification Opportunities for MicroSectors FANG and IQ MacKay
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MicroSectors and MMIN is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG ETN and IQ MacKay Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ MacKay Municipal 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 ETN are associated (or correlated) with IQ MacKay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ MacKay Municipal has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and IQ MacKay go up and down completely randomly.
Pair Corralation between MicroSectors FANG and IQ MacKay
Given the investment horizon of 90 days MicroSectors FANG ETN is expected to generate 3.47 times more return on investment than IQ MacKay. However, MicroSectors FANG is 3.47 times more volatile than IQ MacKay Municipal. It trades about 0.17 of its potential returns per unit of risk. IQ MacKay Municipal is currently generating about 0.08 per unit of risk. If you would invest 5,108 in MicroSectors FANG ETN on August 27, 2024 and sell it today you would earn a total of 262.00 from holding MicroSectors FANG ETN or generate 5.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors FANG ETN vs. IQ MacKay Municipal
Performance |
| Timeline |
| MicroSectors FANG ETN |
| IQ MacKay Municipal |
MicroSectors FANG and IQ MacKay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and IQ MacKay
The main advantage of trading using opposite MicroSectors FANG and IQ MacKay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, IQ MacKay 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 IQ MacKay will offset losses from the drop in IQ MacKay's long position.| MicroSectors FANG vs. iShares Dividend and | MicroSectors FANG vs. Martin Currie Sustainable | MicroSectors FANG vs. VictoryShares THB Mid | MicroSectors FANG vs. Mast Global Battery |
| IQ MacKay vs. Franklin Liberty Intermediate | IQ MacKay vs. Hartford Municipal Opportunities | IQ MacKay vs. IQ MacKay Municipal |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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