Correlation Between MicroSectors FANG and SOGU

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

Diversification Opportunities for MicroSectors FANG and SOGU

-0.9

Correlation Coefficient

MicroSectors FANG  SOGU

Pay attention - limited upside

The 3 months correlation between MicroSectors and SOGU is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and SOGU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOGU 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 SOGU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOGU has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and SOGU go up and down completely randomly.

Pair Corralation between MicroSectors FANG and SOGU

If you would invest  49,425  in MicroSectors FANG Index on September 28, 2024 and sell it today you would earn a total of  12,358  from holding MicroSectors FANG Index or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

MicroSectors FANG Index  vs.  SOGU

MicroSectors FANG Index

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors FANG Index are ranked lower than 16 (%) 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.

SOGU

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOGU has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, SOGU is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MicroSectors FANG and SOGU

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

The idea behind MicroSectors FANG Index and SOGU 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 Global Correlations module to find global opportunities by holding instruments from different markets.