Correlation Between MicroSectors FANG and Advisors Inner

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

By analyzing existing cross correlation between MicroSectors FANG Index and Advisors Inner Circle, you can compare the effects of market volatilities on MicroSectors FANG and Advisors Inner 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 FANG with a short position of Advisors Inner. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Advisors Inner.

Diversification Opportunities for MicroSectors FANG and Advisors Inner

-0.29

Correlation Coefficient

MicroSectors FANG  Advisors Inner

Very good diversification

The 3 months correlation between MicroSectors and Advisors is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Advisors Inner Circle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advisors Inner Circle and MicroSectors 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 MicroSectors FANG Index are associated (or correlated) with Advisors Inner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advisors Inner Circle has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Advisors Inner go up and down completely randomly.

Pair Corralation between MicroSectors FANG and Advisors Inner

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the Advisors Inner. In addition to that, MicroSectors FANG is 9.14 times more volatile than Advisors Inner Circle. It trades about -0.12 of its total potential returns per unit of risk. Advisors Inner Circle is currently generating about 0.06 per unit of volatility. If you would invest  2,373  in Advisors Inner Circle on October 11, 2024 and sell it today you would earn a total of  356.00  from holding Advisors Inner Circle or generate 15.0% return on investment over 90 days.

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

MicroSectors FANG Index  vs.  Advisors Inner Circle

MicroSectors FANG Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MicroSectors FANG Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Advisors Inner Circle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advisors Inner Circle has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Advisors Inner is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with MicroSectors FANG and Advisors Inner

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

The idea behind MicroSectors FANG Index and Advisors Inner Circle 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.