Correlation Between MicroSectors FANG and PBND

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

Diversification Opportunities for MicroSectors FANG and PBND

0.0

Correlation Coefficient

MicroSectors FANG  PBND

Pay attention - limited upside

The 3 months correlation between MicroSectors and PBND is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and PBND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PBND 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 PBND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PBND has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and PBND go up and down completely randomly.

Pair Corralation between MicroSectors FANG and PBND

If you would invest (100.00) in PBND on December 27, 2024 and sell it today you would earn a total of  100.00  from holding PBND or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

MicroSectors FANG Index  vs.  PBND

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.

PBND

Risk-Adjusted Performance

Very Weak

Over the last 90 days PBND has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PBND is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MicroSectors FANG and PBND

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

The idea behind MicroSectors FANG Index and PBND 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.