Correlation Between MicroSectors FANG and 2023 ETF

Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and 2023 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 2023 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 The 2023 ETF, you can compare the effects of market volatilities on MicroSectors FANG and 2023 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 2023 ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and 2023 ETF.

Diversification Opportunities for MicroSectors FANG and 2023 ETF

-0.36

Correlation Coefficient

MicroSectors FANG  2023 ETF

Very good diversification

The 3 months correlation between MicroSectors and 2023 is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and The 2023 ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 2023 ETF 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 2023 ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 2023 ETF has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and 2023 ETF go up and down completely randomly.

Pair Corralation between MicroSectors FANG and 2023 ETF

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the 2023 ETF. In addition to that, MicroSectors FANG is 5.31 times more volatile than The 2023 ETF. It trades about -0.13 of its total potential returns per unit of risk. The 2023 ETF is currently generating about 0.1 per unit of volatility. If you would invest  2,331  in The 2023 ETF on November 19, 2024 and sell it today you would earn a total of  109.00  from holding The 2023 ETF or generate 4.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

MicroSectors FANG Index  vs.  The 2023 ETF

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 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 March 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

2023 ETF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The 2023 ETF are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, 2023 ETF is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with MicroSectors FANG and 2023 ETF

The main advantage of trading using opposite MicroSectors FANG and 2023 ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, 2023 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 2023 ETF will offset losses from the drop in 2023 ETF's long position.

The idea behind MicroSectors FANG Index and The 2023 ETF 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.