Correlation Between MicroSectors FANG and WisdomTree International
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and WisdomTree 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 WisdomTree 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 WisdomTree International SmallCap, you can compare the effects of market volatilities on MicroSectors FANG and WisdomTree 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 WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and WisdomTree International.
Diversification Opportunities for MicroSectors FANG and WisdomTree International
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MicroSectors and WisdomTree is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and WisdomTree International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree 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 WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and WisdomTree International go up and down completely randomly.
Pair Corralation between MicroSectors FANG and WisdomTree International
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 5.43 times more return on investment than WisdomTree International. However, MicroSectors FANG is 5.43 times more volatile than WisdomTree International SmallCap. It trades about 0.19 of its potential returns per unit of risk. WisdomTree International SmallCap is currently generating about -0.11 per unit of risk. If you would invest 43,213 in MicroSectors FANG Index on August 24, 2024 and sell it today you would earn a total of 7,429 from holding MicroSectors FANG Index or generate 17.19% 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. WisdomTree International Small
Performance |
| Timeline |
| MicroSectors FANG Index |
| WisdomTree International |
MicroSectors FANG and WisdomTree International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and WisdomTree International
The main advantage of trading using opposite MicroSectors FANG and WisdomTree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, WisdomTree 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 WisdomTree International will offset losses from the drop in WisdomTree 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |