Correlation Between MicroSectors FANG and ProShares Bitcoin

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

Diversification Opportunities for MicroSectors FANG and ProShares Bitcoin

-0.93

Correlation Coefficient

MicroSectors FANG  ProShares Bitcoin

Pay attention - limited upside

The 3 months correlation between MicroSectors and ProShares is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and ProShares Bitcoin Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Bitcoin 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 ProShares Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Bitcoin has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and ProShares Bitcoin go up and down completely randomly.

Pair Corralation between MicroSectors FANG and ProShares Bitcoin

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the ProShares Bitcoin. In addition to that, MicroSectors FANG is 1.39 times more volatile than ProShares Bitcoin Strategy. It trades about -0.21 of its total potential returns per unit of risk. ProShares Bitcoin Strategy is currently generating about -0.04 per unit of volatility. If you would invest  2,567  in ProShares Bitcoin Strategy on September 23, 2024 and sell it today you would lose (95.00) from holding ProShares Bitcoin Strategy or give up 3.7% of portfolio value over 90 days.

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

MicroSectors FANG Index  vs.  ProShares Bitcoin Strategy

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

ProShares Bitcoin

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Bitcoin Strategy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, ProShares Bitcoin displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MicroSectors FANG and ProShares Bitcoin

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

The idea behind MicroSectors FANG Index and ProShares Bitcoin Strategy 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 CEOs Directory module to screen CEOs from public companies around the world.