Correlation Between MicroSectors FANG and Insight Select

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

Diversification Opportunities for MicroSectors FANG and Insight Select

-0.5

Correlation Coefficient

MicroSectors FANG  Insight Select

Very good diversification

The 3 months correlation between MicroSectors and Insight is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Insight Select Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insight Select Income 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 Insight Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insight Select Income has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Insight Select go up and down completely randomly.

Pair Corralation between MicroSectors FANG and Insight Select

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the Insight Select. In addition to that, MicroSectors FANG is 4.44 times more volatile than Insight Select Income. It trades about -0.18 of its total potential returns per unit of risk. Insight Select Income is currently generating about 0.07 per unit of volatility. If you would invest  1,683  in Insight Select Income on September 5, 2024 and sell it today you would earn a total of  62.00  from holding Insight Select Income or generate 3.68% return on investment over 90 days.

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

MicroSectors FANG Index  vs.  Insight Select Income

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.

Insight Select Income

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Insight Select Income are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Insight Select is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with MicroSectors FANG and Insight Select

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

The idea behind MicroSectors FANG Index and Insight Select Income 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.