Correlation Between MicroSectors FANG and Blackrock ETF

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

Diversification Opportunities for MicroSectors FANG and Blackrock ETF

-0.75

Correlation Coefficient

MicroSectors FANG  Blackrock ETF

Pay attention - limited upside

The 3 months correlation between MicroSectors and Blackrock is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Blackrock ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock ETF Trust 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 Blackrock ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock ETF Trust has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Blackrock ETF go up and down completely randomly.

Pair Corralation between MicroSectors FANG and Blackrock ETF

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the Blackrock ETF. In addition to that, MicroSectors FANG is 34.06 times more volatile than Blackrock ETF Trust. It trades about -0.02 of its total potential returns per unit of risk. Blackrock ETF Trust is currently generating about 0.06 per unit of volatility. If you would invest  5,204  in Blackrock ETF Trust on December 2, 2024 and sell it today you would earn a total of  28.00  from holding Blackrock ETF Trust or generate 0.54% return on investment over 90 days.

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

MicroSectors FANG Index  vs.  Blackrock ETF Trust

MicroSectors FANG Index

Risk-Adjusted Performance

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 latest uncertain performance, the Etf's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Blackrock ETF Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock ETF Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Blackrock ETF is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MicroSectors FANG and Blackrock ETF

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

The idea behind MicroSectors FANG Index and Blackrock ETF Trust 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.