Correlation Between MicroSectors Solactive and IShares Blockchain

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

Diversification Opportunities for MicroSectors Solactive and IShares Blockchain

0.87

Correlation Coefficient

MicroSectors Solactive  IShares Blockchain

Very poor diversification

The 3 months correlation between MicroSectors and IShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Solactive FANG and iShares Blockchain and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Blockchain and 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 IShares Blockchain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Blockchain and has no effect on the direction of MicroSectors Solactive i.e., MicroSectors Solactive and IShares Blockchain go up and down completely randomly.

Pair Corralation between MicroSectors Solactive and IShares Blockchain

Given the investment horizon of 90 days MicroSectors Solactive FANG is expected to generate 1.02 times more return on investment than IShares Blockchain. However, MicroSectors Solactive is 1.02 times more volatile than iShares Blockchain and. It trades about 0.07 of its potential returns per unit of risk. iShares Blockchain and is currently generating about -0.04 per unit of risk. If you would invest  16,185  in MicroSectors Solactive FANG on September 22, 2024 and sell it today you would earn a total of  839.00  from holding MicroSectors Solactive FANG or generate 5.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

MicroSectors Solactive FANG  vs.  iShares Blockchain and

MicroSectors Solactive

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Solactive FANG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, MicroSectors Solactive showed solid returns over the last few months and may actually be approaching a breakup point.

iShares Blockchain and

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Blockchain and are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, IShares Blockchain exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MicroSectors Solactive and IShares Blockchain

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

The idea behind MicroSectors Solactive FANG and iShares Blockchain and 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.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.