Correlation Between MicroSectors FANG and IShares ESG
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and IShares ESG 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 IShares ESG 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 iShares ESG Aggregate, you can compare the effects of market volatilities on MicroSectors FANG and IShares ESG 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 IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and IShares ESG.
Diversification Opportunities for MicroSectors FANG and IShares ESG
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MicroSectors and IShares is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and iShares ESG Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aggregate 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 IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Aggregate has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and IShares ESG go up and down completely randomly.
Pair Corralation between MicroSectors FANG and IShares ESG
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 12.42 times more return on investment than IShares ESG. However, MicroSectors FANG is 12.42 times more volatile than iShares ESG Aggregate. It trades about 0.43 of its potential returns per unit of risk. iShares ESG Aggregate is currently generating about 0.09 per unit of risk. If you would invest 48,556 in MicroSectors FANG Index on September 18, 2024 and sell it today you would earn a total of 18,327 from holding MicroSectors FANG Index or generate 37.74% 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. iShares ESG Aggregate
Performance |
| Timeline |
| MicroSectors FANG Index |
| iShares ESG Aggregate |
MicroSectors FANG and IShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and IShares ESG
The main advantage of trading using opposite MicroSectors FANG and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, IShares ESG 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 IShares ESG will offset losses from the drop in IShares ESG'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 |
| IShares ESG vs. ClearShares Ultra Short Maturity | IShares ESG vs. PGIM Active High | IShares ESG vs. Pacer Trendpilot Bond | IShares ESG vs. Pacer Lunt Large |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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