Correlation Between IShares Oil and MicroSectors FANG
Can any of the company-specific risk be diversified away by investing in both IShares Oil and MicroSectors FANG 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 IShares Oil and MicroSectors FANG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Oil Gas and MicroSectors FANG Index, you can compare the effects of market volatilities on IShares Oil and MicroSectors FANG 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 IShares Oil with a short position of MicroSectors FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Oil and MicroSectors FANG.
Diversification Opportunities for IShares Oil and MicroSectors FANG
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and MicroSectors is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding iShares Oil Gas and MicroSectors FANG Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG Index and IShares Oil 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 iShares Oil Gas are associated (or correlated) with MicroSectors FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG Index has no effect on the direction of IShares Oil i.e., IShares Oil and MicroSectors FANG go up and down completely randomly.
Pair Corralation between IShares Oil and MicroSectors FANG
Considering the 90-day investment horizon iShares Oil Gas is expected to under-perform the MicroSectors FANG. But the etf apears to be less risky and, when comparing its historical volatility, iShares Oil Gas is 4.45 times less risky than MicroSectors FANG. The etf trades about -0.25 of its potential returns per unit of risk. The MicroSectors FANG Index is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 3,797 in MicroSectors FANG Index on February 4, 2024 and sell it today you would lose (242.00) from holding MicroSectors FANG Index or give up 6.37% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
iShares Oil Gas vs. MicroSectors FANG Index
Performance |
Timeline |
iShares Oil Gas |
MicroSectors FANG Index |
IShares Oil and MicroSectors FANG Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares Oil and MicroSectors FANG
The main advantage of trading using opposite IShares Oil and MicroSectors FANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Oil position performs unexpectedly, MicroSectors FANG 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 MicroSectors FANG will offset losses from the drop in MicroSectors FANG's long position.IShares Oil vs. iShares Oil Equipment | IShares Oil vs. iShares Energy ETF | IShares Oil vs. Invesco Dynamic Energy | IShares Oil vs. SPDR SP Oil |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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