Correlation Between MicroSectors FANG and Sprott Physical

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

Diversification Opportunities for MicroSectors FANG and Sprott Physical

-0.75

Correlation Coefficient

MicroSectors FANG  Sprott Physical

Pay attention - limited upside

The 3 months correlation between MicroSectors and Sprott is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Sprott Physical Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Platinum 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 Sprott Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Physical Platinum has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Sprott Physical go up and down completely randomly.

Pair Corralation between MicroSectors FANG and Sprott Physical

Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 2.8 times more return on investment than Sprott Physical. However, MicroSectors FANG is 2.8 times more volatile than Sprott Physical Platinum. It trades about 0.18 of its potential returns per unit of risk. Sprott Physical Platinum is currently generating about -0.09 per unit of risk. If you would invest  40,958  in MicroSectors FANG Index on September 30, 2024 and sell it today you would earn a total of  21,883  from holding MicroSectors FANG Index or generate 53.43% 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.  Sprott Physical Platinum

MicroSectors FANG Index

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors FANG Index are ranked lower than 14 (%) 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.

Sprott Physical Platinum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprott Physical Platinum has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with MicroSectors FANG and Sprott Physical

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

The idea behind MicroSectors FANG Index and Sprott Physical Platinum 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.