Correlation Between MicroSectors FANG and SPDR Dow
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and SPDR Dow 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 SPDR Dow 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 SPDR Dow Jones, you can compare the effects of market volatilities on MicroSectors FANG and SPDR Dow 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 SPDR Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and SPDR Dow.
Diversification Opportunities for MicroSectors FANG and SPDR Dow
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MicroSectors and SPDR is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and SPDR Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Dow Jones 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 SPDR Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Dow Jones has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and SPDR Dow go up and down completely randomly.
Pair Corralation between MicroSectors FANG and SPDR Dow
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 4.89 times more return on investment than SPDR Dow. However, MicroSectors FANG is 4.89 times more volatile than SPDR Dow Jones. It trades about 0.11 of its potential returns per unit of risk. SPDR Dow Jones is currently generating about -0.11 per unit of risk. If you would invest 46,426 in MicroSectors FANG Index on October 22, 2024 and sell it today you would earn a total of 13,274 from holding MicroSectors FANG Index or generate 28.59% 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. SPDR Dow Jones
Performance |
| Timeline |
| MicroSectors FANG Index |
| SPDR Dow Jones |
MicroSectors FANG and SPDR Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and SPDR Dow
The main advantage of trading using opposite MicroSectors FANG and SPDR Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, SPDR Dow 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 SPDR Dow will offset losses from the drop in SPDR Dow'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 |
| SPDR Dow vs. SPDR Dow Jones | SPDR Dow vs. iShares International Developed | SPDR Dow vs. SPDR Dow Jones | SPDR Dow vs. SPDR SP Emerging |
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..
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