Correlation Between MicroSectors FANG and Syntax

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

Diversification Opportunities for MicroSectors FANG and Syntax

-0.74

Correlation Coefficient

MicroSectors FANG  Syntax

Pay attention - limited upside

The 3 months correlation between MicroSectors and Syntax is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Syntax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Syntax 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 Syntax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Syntax has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Syntax go up and down completely randomly.

Pair Corralation between MicroSectors FANG and Syntax

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the Syntax. In addition to that, MicroSectors FANG is 6.13 times more volatile than Syntax. It trades about -0.11 of its total potential returns per unit of risk. Syntax is currently generating about 0.12 per unit of volatility. If you would invest  4,292  in Syntax on October 3, 2024 and sell it today you would earn a total of  797.00  from holding Syntax or generate 18.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	76.03%
Values	Daily Returns

MicroSectors FANG Index  vs.  Syntax

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.

Syntax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Syntax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Syntax is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MicroSectors FANG and Syntax

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

The idea behind MicroSectors FANG Index and Syntax 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.