Correlation Between MicroSectors FANG and Vanguard Total

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

Diversification Opportunities for MicroSectors FANG and Vanguard Total

-0.42

Correlation Coefficient

MicroSectors FANG  Vanguard Total

Very good diversification

The 3 months correlation between MicroSectors and Vanguard is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Vanguard Total Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Corporate 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 Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Corporate has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Vanguard Total go up and down completely randomly.

Pair Corralation between MicroSectors FANG and Vanguard Total

Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 10.51 times more return on investment than Vanguard Total. However, MicroSectors FANG is 10.51 times more volatile than Vanguard Total Corporate. It trades about 0.23 of its potential returns per unit of risk. Vanguard Total Corporate is currently generating about -0.11 per unit of risk. If you would invest  38,380  in MicroSectors FANG Index on September 16, 2024 and sell it today you would earn a total of  25,938  from holding MicroSectors FANG Index or generate 67.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

MicroSectors FANG Index  vs.  Vanguard Total Corporate

MicroSectors FANG Index

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors FANG Index are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, MicroSectors FANG unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Total Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with MicroSectors FANG and Vanguard Total

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

The idea behind MicroSectors FANG Index and Vanguard Total Corporate 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.