Correlation Between MicroSectors FANG and SPDR SP
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and SPDR SP 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 SP 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 SP World, you can compare the effects of market volatilities on MicroSectors FANG and SPDR SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and SPDR SP.
Diversification Opportunities for MicroSectors FANG and SPDR SP
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between MicroSectors and SPDR is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and SPDR SP World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP World 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP World has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and SPDR SP go up and down completely randomly.
Pair Corralation between MicroSectors FANG and SPDR SP
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 5.74 times more return on investment than SPDR SP. However, MicroSectors FANG is 5.74 times more volatile than SPDR SP World. It trades about 0.1 of its potential returns per unit of risk. SPDR SP World is currently generating about 0.06 per unit of risk. If you would invest 20,525 in MicroSectors FANG Index on November 5, 2024 and sell it today you would earn a total of 39,103 from holding MicroSectors FANG Index or generate 190.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.65% |
| Values | Daily Returns |
MicroSectors FANG Index vs. SPDR SP World
Performance |
| Timeline |
| MicroSectors FANG Index |
| SPDR SP World |
MicroSectors FANG and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and SPDR SP
The main advantage of trading using opposite MicroSectors FANG and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, SPDR SP 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 SP will offset losses from the drop in SPDR SP'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 SP vs. SPDR Portfolio Emerging | SPDR SP vs. SPDR Portfolio SP | SPDR SP vs. SPDR Portfolio SP | SPDR SP vs. SPDR Russell Small |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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