Correlation Between MicroSectors FANG and SCOR PK

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

Diversification Opportunities for MicroSectors FANG and SCOR PK

0.48

Correlation Coefficient

MicroSectors FANG  SCOR PK

Very weak diversification

The 3 months correlation between MicroSectors and SCOR is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and SCOR PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOR PK 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 SCOR PK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOR PK has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and SCOR PK go up and down completely randomly.

Pair Corralation between MicroSectors FANG and SCOR PK

Given the investment horizon of 90 days MicroSectors FANG is expected to generate 7.68 times less return on investment than SCOR PK. In addition to that, MicroSectors FANG is 1.73 times more volatile than SCOR PK. It trades about 0.0 of its total potential returns per unit of risk. SCOR PK is currently generating about 0.02 per unit of volatility. If you would invest  300.00  in SCOR PK on January 20, 2024 and sell it today you would earn a total of  4.00  from holding SCOR PK or generate 1.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

MicroSectors FANG Index  vs.  SCOR PK

MicroSectors FANG Index

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors FANG Index are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, MicroSectors FANG unveiled solid returns over the last few months and may actually be approaching a breakup point.

SCOR PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SCOR PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SCOR PK is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MicroSectors FANG and SCOR PK

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

The idea behind MicroSectors FANG Index and SCOR PK 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.