Correlation Between MicroSectors FANG and Apple
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and Apple 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 Apple 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 Apple Inc, you can compare the effects of market volatilities on MicroSectors FANG and Apple 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 Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Apple.
Diversification Opportunities for MicroSectors FANG and Apple
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MicroSectors and Apple is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Apple go up and down completely randomly.
Pair Corralation between MicroSectors FANG and Apple
Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the Apple. In addition to that, MicroSectors FANG is 2.91 times more volatile than Apple Inc. It trades about -0.05 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.02 per unit of volatility. If you would invest 18,479 in Apple Inc on February 13, 2024 and sell it today you would earn a total of 149.00 from holding Apple Inc or generate 0.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
MicroSectors FANG Index vs. Apple Inc
Performance |
| Timeline |
| MicroSectors FANG Index |
| Apple Inc |
MicroSectors FANG and Apple Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and Apple
The main advantage of trading using opposite MicroSectors FANG and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.| MicroSectors FANG vs. Direxion Daily Energy | MicroSectors FANG vs. Direxion Daily MSCI | MicroSectors FANG vs. Direxion Daily Small | MicroSectors FANG vs. Direxion Daily Real |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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