Correlation Between MicroSectors FANG and Invesco DWA
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and Invesco DWA 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 Invesco DWA 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 Invesco DWA Healthcare, you can compare the effects of market volatilities on MicroSectors FANG and Invesco DWA 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 Invesco DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Invesco DWA.
Diversification Opportunities for MicroSectors FANG and Invesco DWA
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MicroSectors and Invesco is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Invesco DWA Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Healthcare 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 Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Healthcare has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Invesco DWA go up and down completely randomly.
Pair Corralation between MicroSectors FANG and Invesco DWA
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 2.36 times more return on investment than Invesco DWA. However, MicroSectors FANG is 2.36 times more volatile than Invesco DWA Healthcare. It trades about 0.46 of its potential returns per unit of risk. Invesco DWA Healthcare is currently generating about -0.16 per unit of risk. If you would invest 47,760 in MicroSectors FANG Index on September 16, 2024 and sell it today you would earn a total of 16,558 from holding MicroSectors FANG Index or generate 34.67% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
MicroSectors FANG Index vs. Invesco DWA Healthcare
Performance |
Timeline |
MicroSectors FANG Index |
Invesco DWA Healthcare |
MicroSectors FANG and Invesco DWA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MicroSectors FANG and Invesco DWA
The main advantage of trading using opposite MicroSectors FANG and Invesco DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, Invesco DWA 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 Invesco DWA will offset losses from the drop in Invesco DWA's long position.MicroSectors FANG vs. ProShares Ultra SP500 | MicroSectors FANG vs. Direxion Daily SP | MicroSectors FANG vs. Direxion Daily SP | MicroSectors FANG vs. ProShares Ultra Financials |
Invesco DWA vs. Invesco DWA Industrials | Invesco DWA vs. Invesco DWA Consumer | Invesco DWA vs. Invesco DWA Consumer | Invesco DWA vs. Invesco DWA Basic |
Check out your portfolio center.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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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