Correlation Between ETFS FANG and ETFS Ultra

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

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

Diversification Opportunities for ETFS FANG and ETFS Ultra

0.9

Correlation Coefficient

ETFS FANG  ETFS Ultra

Almost no diversification

The 3 months correlation between ETFS and ETFS is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding ETFS FANG ETF and ETFS Ultra Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Ultra Long and ETFS FANG 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 ETFS FANG ETF are associated (or correlated) with ETFS Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Ultra Long has no effect on the direction of ETFS FANG i.e., ETFS FANG and ETFS Ultra go up and down completely randomly.

Pair Corralation between ETFS FANG and ETFS Ultra

Assuming the 90 days trading horizon ETFS FANG ETF is expected to generate 0.53 times more return on investment than ETFS Ultra. However, ETFS FANG ETF is 1.9 times less risky than ETFS Ultra. It trades about 0.18 of its potential returns per unit of risk. ETFS Ultra Long is currently generating about 0.09 per unit of risk. If you would invest  2,542  in ETFS FANG ETF on September 3, 2024 and sell it today you would earn a total of  398.00  from holding ETFS FANG ETF or generate 15.66% return on investment over 90 days.

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

ETFS FANG ETF  vs.  ETFS Ultra Long

ETFS FANG ETF

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS FANG ETF are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ETFS FANG unveiled solid returns over the last few months and may actually be approaching a breakup point.

ETFS Ultra Long

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS Ultra Long are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ETFS Ultra unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ETFS FANG and ETFS Ultra

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

The idea behind ETFS FANG ETF and ETFS Ultra Long 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.