Correlation Between MicroSectors FANG and Bitwise Crypto

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

Diversification Opportunities for MicroSectors FANG and Bitwise Crypto

-0.9

Correlation Coefficient

MicroSectors FANG  Bitwise Crypto

Pay attention - limited upside

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

Pair Corralation between MicroSectors FANG and Bitwise Crypto

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the Bitwise Crypto. In addition to that, MicroSectors FANG is 1.11 times more volatile than Bitwise Crypto Industry. It trades about -0.14 of its total potential returns per unit of risk. Bitwise Crypto Industry is currently generating about 0.1 per unit of volatility. If you would invest  334.00  in Bitwise Crypto Industry on September 23, 2024 and sell it today you would earn a total of  1,552  from holding Bitwise Crypto Industry or generate 464.67% return on investment over 90 days.

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

MicroSectors FANG Index  vs.  Bitwise Crypto Industry

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.

Bitwise Crypto Industry

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bitwise Crypto Industry are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Bitwise Crypto reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MicroSectors FANG and Bitwise Crypto

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

The idea behind MicroSectors FANG Index and Bitwise Crypto Industry 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.