Correlation Between MicroSectorsTM Oil and MicroSectors FANG
Can any of the company-specific risk be diversified away by investing in both MicroSectorsTM Oil and MicroSectors 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 MicroSectorsTM Oil and MicroSectors FANG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectorsTM Oil Gas and MicroSectors FANG Index, you can compare the effects of market volatilities on MicroSectorsTM Oil and MicroSectors 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 MicroSectorsTM Oil with a short position of MicroSectors FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectorsTM Oil and MicroSectors FANG.
Diversification Opportunities for MicroSectorsTM Oil and MicroSectors FANG
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MicroSectorsTM and MicroSectors is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectorsTM Oil Gas and MicroSectors FANG Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG Index and MicroSectorsTM Oil 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 MicroSectorsTM Oil Gas are associated (or correlated) with MicroSectors FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG Index has no effect on the direction of MicroSectorsTM Oil i.e., MicroSectorsTM Oil and MicroSectors FANG go up and down completely randomly.
Pair Corralation between MicroSectorsTM Oil and MicroSectors FANG
Given the investment horizon of 90 days MicroSectorsTM Oil Gas is expected to generate 0.8 times more return on investment than MicroSectors FANG. However, MicroSectorsTM Oil Gas is 1.26 times less risky than MicroSectors FANG. It trades about -0.01 of its potential returns per unit of risk. MicroSectors FANG Index is currently generating about -0.09 per unit of risk. If you would invest 1,790 in MicroSectorsTM Oil Gas on September 3, 2024 and sell it today you would lose (438.00) from holding MicroSectorsTM Oil Gas or give up 24.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectorsTM Oil Gas vs. MicroSectors FANG Index
Performance |
| Timeline |
| MicroSectorsTM Oil Gas |
| MicroSectors FANG Index |
MicroSectorsTM Oil and MicroSectors FANG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectorsTM Oil and MicroSectors FANG
The main advantage of trading using opposite MicroSectorsTM Oil and MicroSectors FANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectorsTM Oil position performs unexpectedly, MicroSectors 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 MicroSectors FANG will offset losses from the drop in MicroSectors FANG's long position.| MicroSectorsTM Oil vs. MicroSectorsTM Oil Gas | MicroSectorsTM Oil vs. UBS ETRACS | MicroSectorsTM Oil vs. Direxion Daily SP | MicroSectorsTM Oil vs. MicroSectors FANG Index |
| MicroSectors FANG vs. MicroSectors FANG Index | MicroSectors FANG vs. Direxion Daily Semiconductor | MicroSectors FANG vs. Direxion Daily Technology | MicroSectors FANG vs. Direxion Daily SP |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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