Correlation Between MicroSectors FANG and ALPS

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

Diversification Opportunities for MicroSectors FANG and ALPS

-0.84

Correlation Coefficient

MicroSectors FANG  ALPS

Pay attention - limited upside

The 3 months correlation between MicroSectors and ALPS is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and ALPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS 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 ALPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and ALPS go up and down completely randomly.

Pair Corralation between MicroSectors FANG and ALPS

If you would invest  2,444  in ALPS on October 6, 2024 and sell it today you would earn a total of  0.00  from holding ALPS or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	5.0%
Values	Daily Returns

MicroSectors FANG Index  vs.  ALPS

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.

ALPS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALPS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, ALPS is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with MicroSectors FANG and ALPS

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

The idea behind MicroSectors FANG Index and ALPS 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.