Correlation Between MicroSectors FANG and SPDR Bloomberg

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

Diversification Opportunities for MicroSectors FANG and SPDR Bloomberg

-0.5

Correlation Coefficient

MicroSectors FANG  SPDR Bloomberg

Very good diversification

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

Pair Corralation between MicroSectors FANG and SPDR Bloomberg

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the SPDR Bloomberg. In addition to that, MicroSectors FANG is 12.79 times more volatile than SPDR Bloomberg International. It trades about -0.09 of its total potential returns per unit of risk. SPDR Bloomberg International is currently generating about 0.08 per unit of volatility. If you would invest  2,139  in SPDR Bloomberg International on December 30, 2024 and sell it today you would earn a total of  46.00  from holding SPDR Bloomberg International or generate 2.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	88.71%
Values	Daily Returns

MicroSectors FANG Index  vs.  SPDR Bloomberg International

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 conflicting performance in the last few months, the Etf's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

SPDR Bloomberg Inter

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MicroSectors FANG and SPDR Bloomberg

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

The idea behind MicroSectors FANG Index and SPDR Bloomberg International 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.