Correlation Between MicroSectors FANG and Listed Funds

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

Diversification Opportunities for MicroSectors FANG and Listed Funds

-0.64

Correlation Coefficient

MicroSectors FANG  Listed Funds

Excellent diversification

The 3 months correlation between MicroSectors and Listed is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Listed Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Listed Funds Trust 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 Listed Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Listed Funds Trust has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Listed Funds go up and down completely randomly.

Pair Corralation between MicroSectors FANG and Listed Funds

Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 36.98 times more return on investment than Listed Funds. However, MicroSectors FANG is 36.98 times more volatile than Listed Funds Trust. It trades about 0.15 of its potential returns per unit of risk. Listed Funds Trust is currently generating about 0.22 per unit of risk. If you would invest  3,572  in MicroSectors FANG Index on January 25, 2024 and sell it today you would earn a total of  481.00  from holding MicroSectors FANG Index or generate 13.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

MicroSectors FANG Index  vs.  Listed Funds Trust

MicroSectors FANG Index

Risk-Adjusted Performance

0 of 100

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 latest conflicting performance, the Etf's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Listed Funds Trust

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Listed Funds Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Listed Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MicroSectors FANG and Listed Funds

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

The idea behind MicroSectors FANG Index and Listed Funds Trust 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.