Correlation Between VictoryShares THB and MicroSectors FANG

Can any of the company-specific risk be diversified away by investing in both VictoryShares THB and MicroSectors FANG 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 VictoryShares THB and MicroSectors FANG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VictoryShares THB Mid and MicroSectors FANG ETN, you can compare the effects of market volatilities on VictoryShares THB and MicroSectors FANG 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 VictoryShares THB with a short position of MicroSectors FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of VictoryShares THB and MicroSectors FANG.

Diversification Opportunities for VictoryShares THB and MicroSectors FANG

0.74

Correlation Coefficient

VictoryShares THB  MicroSectors FANG

Poor diversification

The 3 months correlation between VictoryShares and MicroSectors is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding VictoryShares THB Mid and MicroSectors FANG ETN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG ETN and VictoryShares THB 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 VictoryShares THB Mid are associated (or correlated) with MicroSectors FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG ETN has no effect on the direction of VictoryShares THB i.e., VictoryShares THB and MicroSectors FANG go up and down completely randomly.

Pair Corralation between VictoryShares THB and MicroSectors FANG

Given the investment horizon of 90 days VictoryShares THB is expected to generate 4.66 times less return on investment than MicroSectors FANG. But when comparing it to its historical volatility, VictoryShares THB Mid is 1.61 times less risky than MicroSectors FANG. It trades about 0.08 of its potential returns per unit of risk. MicroSectors FANG ETN is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  4,857  in MicroSectors FANG ETN on September 13, 2024 and sell it today you would earn a total of  963.00  from holding MicroSectors FANG ETN or generate 19.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

VictoryShares THB Mid  vs.  MicroSectors FANG ETN

VictoryShares THB Mid

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VictoryShares THB Mid are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, VictoryShares THB is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

MicroSectors FANG ETN

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors FANG ETN are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, MicroSectors FANG unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VictoryShares THB and MicroSectors FANG

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

The idea behind VictoryShares THB Mid and MicroSectors FANG ETN 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.