Correlation Between MicroSectors FANG and US Global
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
MicroSectors FANG Index vs. US Global Sea
Performance |
Timeline |
MicroSectors FANG Index |
US Global Sea |
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.MicroSectors FANG vs. IShares US Dividend | MicroSectors FANG vs. Martin Currie Sustainable | MicroSectors FANG vs. VictoryShares THB Mid | MicroSectors FANG vs. AdvisorShares Gerber Kawasaki |
US Global vs. IShares US Dividend | US Global vs. Martin Currie Sustainable | US Global vs. VictoryShares THB Mid | US Global vs. AdvisorShares Gerber Kawasaki |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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