Correlation Between MicroSectors FANG and AdvisorShares Dorsey

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

Diversification Opportunities for MicroSectors FANG and AdvisorShares Dorsey

-0.1

Correlation Coefficient

MicroSectors FANG  AdvisorShares Dorsey

Good diversification

The 3 months correlation between MicroSectors and AdvisorShares is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and AdvisorShares Dorsey Wright in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Dorsey 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 AdvisorShares Dorsey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Dorsey has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and AdvisorShares Dorsey go up and down completely randomly.

Pair Corralation between MicroSectors FANG and AdvisorShares Dorsey

Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 4.29 times more return on investment than AdvisorShares Dorsey. However, MicroSectors FANG is 4.29 times more volatile than AdvisorShares Dorsey Wright. It trades about 0.08 of its potential returns per unit of risk. AdvisorShares Dorsey Wright is currently generating about 0.0 per unit of risk. If you would invest  42,498  in MicroSectors FANG Index on September 23, 2024 and sell it today you would earn a total of  19,002  from holding MicroSectors FANG Index or generate 44.71% return on investment over 90 days.

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

MicroSectors FANG Index  vs.  AdvisorShares Dorsey Wright

MicroSectors FANG Index

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors FANG Index are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, MicroSectors FANG unveiled solid returns over the last few months and may actually be approaching a breakup point.

AdvisorShares Dorsey

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AdvisorShares Dorsey Wright are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, AdvisorShares Dorsey is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with MicroSectors FANG and AdvisorShares Dorsey

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

The idea behind MicroSectors FANG Index and AdvisorShares Dorsey Wright 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.