Correlation Between ETFS FANG and ETFS Morningstar

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

Diversification Opportunities for ETFS FANG and ETFS Morningstar

0.86

Correlation Coefficient

ETFS FANG  ETFS Morningstar

Very poor diversification

The 3 months correlation between ETFS and ETFS is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ETFS FANG ETF and ETFS Morningstar Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Morningstar Global 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 Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Morningstar Global has no effect on the direction of ETFS FANG i.e., ETFS FANG and ETFS Morningstar go up and down completely randomly.

Pair Corralation between ETFS FANG and ETFS Morningstar

Assuming the 90 days trading horizon ETFS FANG ETF is expected to under-perform the ETFS Morningstar. In addition to that, ETFS FANG is 1.29 times more volatile than ETFS Morningstar Global. It trades about -0.13 of its total potential returns per unit of risk. ETFS Morningstar Global is currently generating about -0.07 per unit of volatility. If you would invest  11,378  in ETFS Morningstar Global on December 29, 2024 and sell it today you would lose (580.00) from holding ETFS Morningstar Global or give up 5.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

ETFS FANG ETF  vs.  ETFS Morningstar Global

ETFS FANG ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETFS FANG ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

ETFS Morningstar Global

Risk-Adjusted Performance

Very Weak

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

Pair Trading with ETFS FANG and ETFS Morningstar

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

The idea behind ETFS FANG ETF and ETFS Morningstar Global 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.