Correlation Between MicroSectors FANG and VanEck Video
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and VanEck Video 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 Video 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 Video Gaming, you can compare the effects of market volatilities on MicroSectors FANG and VanEck Video 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 Video. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and VanEck Video.
Diversification Opportunities for MicroSectors FANG and VanEck Video
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MicroSectors and VanEck is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and VanEck Video Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Video Gaming 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 Video. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Video Gaming has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and VanEck Video go up and down completely randomly.
Pair Corralation between MicroSectors FANG and VanEck Video
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 3.37 times more return on investment than VanEck Video. However, MicroSectors FANG is 3.37 times more volatile than VanEck Video Gaming. It trades about 0.11 of its potential returns per unit of risk. VanEck Video Gaming is currently generating about 0.13 per unit of risk. If you would invest 19,760 in MicroSectors FANG Index on August 27, 2024 and sell it today you would earn a total of 31,140 from holding MicroSectors FANG Index or generate 157.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors FANG Index vs. VanEck Video Gaming
Performance |
| Timeline |
| MicroSectors FANG Index |
| VanEck Video Gaming |
MicroSectors FANG and VanEck Video Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and VanEck Video
The main advantage of trading using opposite MicroSectors FANG and VanEck Video positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, VanEck Video 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 Video will offset losses from the drop in VanEck Video's long position.| MicroSectors FANG vs. Direxion Daily SP | MicroSectors FANG vs. Direxion Daily Semiconductor | MicroSectors FANG vs. Direxion Daily Semiconductor |
| VanEck Video vs. Vanguard Industrials Index | VanEck Video vs. Vanguard Materials Index | VanEck Video vs. Vanguard Consumer Discretionary | VanEck Video vs. Vanguard Consumer Staples |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
Other Complementary Tools
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |