Correlation Between MicroSectors FANG and Innovator MSCI
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and Innovator MSCI 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 Innovator MSCI 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 Innovator MSCI EAFE, you can compare the effects of market volatilities on MicroSectors FANG and Innovator MSCI 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 Innovator MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Innovator MSCI.
Diversification Opportunities for MicroSectors FANG and Innovator MSCI
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MicroSectors and Innovator is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Innovator MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator MSCI EAFE 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 Innovator MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator MSCI EAFE has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Innovator MSCI go up and down completely randomly.
Pair Corralation between MicroSectors FANG and Innovator MSCI
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 8.28 times more return on investment than Innovator MSCI. However, MicroSectors FANG is 8.28 times more volatile than Innovator MSCI EAFE. It trades about 0.14 of its potential returns per unit of risk. Innovator MSCI EAFE is currently generating about -0.13 per unit of risk. If you would invest 36,940 in MicroSectors FANG Index on August 29, 2024 and sell it today you would earn a total of 14,600 from holding MicroSectors FANG Index or generate 39.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors FANG Index vs. Innovator MSCI EAFE
Performance |
| Timeline |
| MicroSectors FANG Index |
| Innovator MSCI EAFE |
MicroSectors FANG and Innovator MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and Innovator MSCI
The main advantage of trading using opposite MicroSectors FANG and Innovator MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, Innovator MSCI 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 Innovator MSCI will offset losses from the drop in Innovator MSCI'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 |
| Innovator MSCI vs. ABIVAX Socit Anonyme | Innovator MSCI vs. Pinnacle Sherman Multi Strategy | Innovator MSCI vs. Morningstar Unconstrained Allocation | Innovator MSCI vs. SPACE |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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