Correlation Between MicroSectors Solactive and SOGU

Can any of the company-specific risk be diversified away by investing in both MicroSectors Solactive and SOGU 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 SOGU 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 SOGU, you can compare the effects of market volatilities on MicroSectors Solactive and SOGU 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 SOGU. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors Solactive and SOGU.

Diversification Opportunities for MicroSectors Solactive and SOGU

0.52

Correlation Coefficient

MicroSectors Solactive  SOGU

Very weak diversification

The 3 months correlation between MicroSectors and SOGU is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Solactive FANG and SOGU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOGU 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 SOGU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOGU has no effect on the direction of MicroSectors Solactive i.e., MicroSectors Solactive and SOGU go up and down completely randomly.

Pair Corralation between MicroSectors Solactive and SOGU

Given the investment horizon of 90 days MicroSectors Solactive FANG is expected to under-perform the SOGU. In addition to that, MicroSectors Solactive is 2.17 times more volatile than SOGU. It trades about -0.11 of its total potential returns per unit of risk. SOGU is currently generating about -0.06 per unit of volatility. If you would invest  2,925  in SOGU on October 21, 2024 and sell it today you would lose (425.00) from holding SOGU or give up 14.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	20.97%
Values	Daily Returns

MicroSectors Solactive FANG  vs.  SOGU

MicroSectors Solactive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MicroSectors Solactive FANG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

SOGU

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOGU has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, SOGU is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MicroSectors Solactive and SOGU

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

The idea behind MicroSectors Solactive FANG and SOGU 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.