Correlation Between MicroSectors FANG and Dimensional International
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and Dimensional International 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 Dimensional International 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 Dimensional International Core, you can compare the effects of market volatilities on MicroSectors FANG and Dimensional International 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 Dimensional International. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Dimensional International.
Diversification Opportunities for MicroSectors FANG and Dimensional International
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between MicroSectors and Dimensional is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Dimensional International Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional International 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 Dimensional International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional International has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Dimensional International go up and down completely randomly.
Pair Corralation between MicroSectors FANG and Dimensional International
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 7.58 times more return on investment than Dimensional International. However, MicroSectors FANG is 7.58 times more volatile than Dimensional International Core. It trades about 0.07 of its potential returns per unit of risk. Dimensional International Core is currently generating about 0.34 per unit of risk. If you would invest 59,277 in MicroSectors FANG Index on November 3, 2024 and sell it today you would earn a total of 3,223 from holding MicroSectors FANG Index or generate 5.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
MicroSectors FANG Index vs. Dimensional International Core
Performance |
| Timeline |
| MicroSectors FANG Index |
| Dimensional International |
MicroSectors FANG and Dimensional International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and Dimensional International
The main advantage of trading using opposite MicroSectors FANG and Dimensional International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, Dimensional International 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 Dimensional International will offset losses from the drop in Dimensional International's long position.| MicroSectors FANG vs. Direxion Daily Semiconductor | MicroSectors FANG vs. MicroSectors Solactive FANG | MicroSectors FANG vs. MicroSectors FANG Index | MicroSectors FANG vs. Direxion Daily Technology |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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