Correlation Between MicroSectors FANG and ProShares
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and ProShares 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 ProShares 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 ProShares K 1 Free, you can compare the effects of market volatilities on MicroSectors FANG and ProShares 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 ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and ProShares.
Diversification Opportunities for MicroSectors FANG and ProShares
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MicroSectors and ProShares is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and ProShares K 1 Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares K 1 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 ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares K 1 has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and ProShares go up and down completely randomly.
Pair Corralation between MicroSectors FANG and ProShares
Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the ProShares. In addition to that, MicroSectors FANG is 3.55 times more volatile than ProShares K 1 Free. It trades about -0.08 of its total potential returns per unit of risk. ProShares K 1 Free is currently generating about 0.11 per unit of volatility. If you would invest 4,337 in ProShares K 1 Free on January 20, 2024 and sell it today you would earn a total of 461.00 from holding ProShares K 1 Free or generate 10.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.8% |
| Values | Daily Returns |
MicroSectors FANG Index vs. ProShares K 1 Free
Performance |
| Timeline |
| MicroSectors FANG Index |
| ProShares K 1 |
MicroSectors FANG and ProShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and ProShares
The main advantage of trading using opposite MicroSectors FANG and ProShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, ProShares 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 ProShares will offset losses from the drop in ProShares' long position.| MicroSectors FANG vs. ProShares Ultra SP500 | MicroSectors FANG vs. HUMANA INC | MicroSectors FANG vs. Aquagold International | MicroSectors FANG vs. Thrivent High Yield |
| ProShares vs. United States 12 | ProShares vs. Credit Suisse X Links | ProShares vs. Invesco DB Oil | ProShares vs. United States 12 |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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