Correlation Between MicroSectors FANG and US Global

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

Diversification Opportunities for MicroSectors FANG and US Global

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between MicroSectors and SEA is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and US Global Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Global Sea 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 US Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Global Sea has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and US Global go up and down completely randomly.

Pair Corralation between MicroSectors FANG and US Global

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the US Global. In addition to that, MicroSectors FANG is 3.82 times more volatile than US Global Sea. It trades about -0.08 of its total potential returns per unit of risk. US Global Sea is currently generating about 0.02 per unit of volatility. If you would invest  1,371  in US Global Sea on December 29, 2023 and sell it today you would earn a total of  137.00  from holding US Global Sea or generate 9.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

MicroSectors FANG Index  vs.  US Global Sea

 Performance 
       Timeline  
MicroSectors FANG Index 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days MicroSectors FANG Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2024. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.
US Global Sea 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days US Global Sea has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, US Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

MicroSectors FANG and US Global Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MicroSectors FANG and US Global

The main advantage of trading using opposite MicroSectors FANG and US Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, US Global 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 US Global will offset losses from the drop in US Global's long position.
The idea behind MicroSectors FANG Index and US Global Sea 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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