Correlation Between MicroSectors Solactive and CONSTELLATION

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

Diversification Opportunities for MicroSectors Solactive and CONSTELLATION

-0.37

Correlation Coefficient

MicroSectors Solactive  CONSTELLATION

Very good diversification

The 3 months correlation between MicroSectors and CONSTELLATION is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Solactive FANG and CONSTELLATION ENERGY GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSTELLATION ENERGY 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 CONSTELLATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSTELLATION ENERGY has no effect on the direction of MicroSectors Solactive i.e., MicroSectors Solactive and CONSTELLATION go up and down completely randomly.

Pair Corralation between MicroSectors Solactive and CONSTELLATION

Given the investment horizon of 90 days MicroSectors Solactive FANG is expected to generate 3.07 times more return on investment than CONSTELLATION. However, MicroSectors Solactive is 3.07 times more volatile than CONSTELLATION ENERGY GROUP. It trades about 0.1 of its potential returns per unit of risk. CONSTELLATION ENERGY GROUP is currently generating about 0.0 per unit of risk. If you would invest  2,672  in MicroSectors Solactive FANG on October 3, 2024 and sell it today you would earn a total of  13,541  from holding MicroSectors Solactive FANG or generate 506.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	72.73%
Values	Daily Returns

MicroSectors Solactive FANG  vs.  CONSTELLATION ENERGY GROUP

MicroSectors Solactive

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Solactive FANG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, MicroSectors Solactive showed solid returns over the last few months and may actually be approaching a breakup point.

CONSTELLATION ENERGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONSTELLATION ENERGY GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CONSTELLATION ENERGY GROUP investors.

Pair Trading with MicroSectors Solactive and CONSTELLATION

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

The idea behind MicroSectors Solactive FANG and CONSTELLATION ENERGY GROUP 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.