Correlation Between MicroSectors Solactive and MicroSectors Gold

Can any of the company-specific risk be diversified away by investing in both MicroSectors Solactive and MicroSectors Gold 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 Solactive and MicroSectors Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MicroSectors Solactive FANG and MicroSectors Gold Miners, you can compare the effects of market volatilities on MicroSectors Solactive and MicroSectors Gold 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 Solactive with a short position of MicroSectors Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors Solactive and MicroSectors Gold.

Diversification Opportunities for MicroSectors Solactive and MicroSectors Gold

-0.51

Correlation Coefficient

MicroSectors Solactive  MicroSectors Gold

Excellent diversification

The 3 months correlation between MicroSectors and MicroSectors is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Solactive FANG and MicroSectors Gold Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Gold Miners and MicroSectors Solactive 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 Solactive FANG are associated (or correlated) with MicroSectors Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Gold Miners has no effect on the direction of MicroSectors Solactive i.e., MicroSectors Solactive and MicroSectors Gold go up and down completely randomly.

Pair Corralation between MicroSectors Solactive and MicroSectors Gold

Given the investment horizon of 90 days MicroSectors Solactive is expected to generate 3.63 times less return on investment than MicroSectors Gold. But when comparing it to its historical volatility, MicroSectors Solactive FANG is 1.1 times less risky than MicroSectors Gold. It trades about 0.02 of its potential returns per unit of risk. MicroSectors Gold Miners is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,494  in MicroSectors Gold Miners on December 1, 2024 and sell it today you would earn a total of  459.00  from holding MicroSectors Gold Miners or generate 13.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

MicroSectors Solactive FANG  vs.  MicroSectors Gold Miners

MicroSectors Solactive

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Solactive FANG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, MicroSectors Solactive may actually be approaching a critical reversion point that can send shares even higher in April 2025.

MicroSectors Gold Miners

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Gold Miners are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MicroSectors Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MicroSectors Solactive and MicroSectors Gold

The main advantage of trading using opposite MicroSectors Solactive and MicroSectors Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors Solactive position performs unexpectedly, MicroSectors Gold 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 Gold will offset losses from the drop in MicroSectors Gold's long position.

The idea behind MicroSectors Solactive FANG and MicroSectors Gold Miners pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..