Correlation Between ETFS Physical and ETFS FANG
Can any of the company-specific risk be diversified away by investing in both ETFS Physical and ETFS FANG 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 ETFS Physical and ETFS FANG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETFS Physical Gold and ETFS FANG ETF, you can compare the effects of market volatilities on ETFS Physical and ETFS FANG 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 ETFS Physical with a short position of ETFS FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETFS Physical and ETFS FANG.
Diversification Opportunities for ETFS Physical and ETFS FANG
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ETFS and ETFS is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Physical Gold and ETFS FANG ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS FANG ETF and ETFS Physical 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 ETFS Physical Gold are associated (or correlated) with ETFS FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS FANG ETF has no effect on the direction of ETFS Physical i.e., ETFS Physical and ETFS FANG go up and down completely randomly.
Pair Corralation between ETFS Physical and ETFS FANG
Assuming the 90 days trading horizon ETFS Physical Gold is expected to under-perform the ETFS FANG. But the etf apears to be less risky and, when comparing its historical volatility, ETFS Physical Gold is 1.06 times less risky than ETFS FANG. The etf trades about -0.05 of its potential returns per unit of risk. The ETFS FANG ETF is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2,802 in ETFS FANG ETF on August 29, 2024 and sell it today you would earn a total of 161.00 from holding ETFS FANG ETF or generate 5.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETFS Physical Gold vs. ETFS FANG ETF
Performance |
| Timeline |
| ETFS Physical Gold |
| ETFS FANG ETF |
ETFS Physical and ETFS FANG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETFS Physical and ETFS FANG
The main advantage of trading using opposite ETFS Physical and ETFS FANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETFS Physical position performs unexpectedly, ETFS FANG 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 ETFS FANG will offset losses from the drop in ETFS FANG's long position.| ETFS Physical vs. ETFS Battery Tech | ETFS Physical vs. ETFS Ultra Long | ETFS Physical vs. ETFS Ultra Short | ETFS Physical vs. ETFS FANG ETF |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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