Correlation Between MicroSectors FANG and Invesco BulletShares

Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and Invesco BulletShares 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 Invesco BulletShares 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 Invesco BulletShares 2025, you can compare the effects of market volatilities on MicroSectors FANG and Invesco BulletShares 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 Invesco BulletShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Invesco BulletShares.

Diversification Opportunities for MicroSectors FANG and Invesco BulletShares

-0.93

Correlation Coefficient

MicroSectors FANG  Invesco BulletShares

Pay attention - limited upside

The 3 months correlation between MicroSectors and Invesco is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Invesco BulletShares 2025 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco BulletShares 2025 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 Invesco BulletShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco BulletShares 2025 has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Invesco BulletShares go up and down completely randomly.

Pair Corralation between MicroSectors FANG and Invesco BulletShares

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the Invesco BulletShares. In addition to that, MicroSectors FANG is 37.72 times more volatile than Invesco BulletShares 2025. It trades about -0.17 of its total potential returns per unit of risk. Invesco BulletShares 2025 is currently generating about 0.28 per unit of volatility. If you would invest  2,269  in Invesco BulletShares 2025 on September 2, 2024 and sell it today you would earn a total of  42.00  from holding Invesco BulletShares 2025 or generate 1.85% 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.  Invesco BulletShares 2025

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.

Invesco BulletShares 2025

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco BulletShares 2025 are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking indicators, Invesco BulletShares is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with MicroSectors FANG and Invesco BulletShares

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

The idea behind MicroSectors FANG Index and Invesco BulletShares 2025 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.