Correlation Between MicroSectors FANG and Tradr 2X

Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and Tradr 2X 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 Tradr 2X 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 Tradr 2X Long, you can compare the effects of market volatilities on MicroSectors FANG and Tradr 2X 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 Tradr 2X. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Tradr 2X.

Diversification Opportunities for MicroSectors FANG and Tradr 2X

-0.6

Correlation Coefficient

MicroSectors FANG  Tradr 2X

Excellent diversification

The 3 months correlation between MicroSectors and Tradr is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Tradr 2X Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tradr 2X Long 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 Tradr 2X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tradr 2X Long has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Tradr 2X go up and down completely randomly.

Pair Corralation between MicroSectors FANG and Tradr 2X

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the Tradr 2X. In addition to that, MicroSectors FANG is 2.81 times more volatile than Tradr 2X Long. It trades about -0.09 of its total potential returns per unit of risk. Tradr 2X Long is currently generating about 0.09 per unit of volatility. If you would invest  2,829  in Tradr 2X Long on December 30, 2024 and sell it today you would earn a total of  201.00  from holding Tradr 2X Long or generate 7.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	76.36%
Values	Daily Returns

MicroSectors FANG Index  vs.  Tradr 2X Long

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.

Tradr 2X Long

Risk-Adjusted Performance

OK

Over the last 90 days Tradr 2X Long has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, Tradr 2X may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with MicroSectors FANG and Tradr 2X

The main advantage of trading using opposite MicroSectors FANG and Tradr 2X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, Tradr 2X 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 Tradr 2X will offset losses from the drop in Tradr 2X's long position.

The idea behind MicroSectors FANG Index and Tradr 2X Long 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.