Correlation Between MicroSectors FANG and SPDR Bloomberg

Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and SPDR Bloomberg 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 SPDR Bloomberg 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 SPDR Bloomberg 1 3, you can compare the effects of market volatilities on MicroSectors FANG and SPDR Bloomberg 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 SPDR Bloomberg. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and SPDR Bloomberg.

Diversification Opportunities for MicroSectors FANG and SPDR Bloomberg

-0.36

Correlation Coefficient

MicroSectors FANG  SPDR Bloomberg

Very good diversification

The 3 months correlation between MicroSectors and SPDR is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and SPDR Bloomberg 1 3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Bloomberg 1 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 SPDR Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Bloomberg 1 has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and SPDR Bloomberg go up and down completely randomly.

Pair Corralation between MicroSectors FANG and SPDR Bloomberg

Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 236.99 times more return on investment than SPDR Bloomberg. However, MicroSectors FANG is 236.99 times more volatile than SPDR Bloomberg 1 3. It trades about 0.6 of its potential returns per unit of risk. SPDR Bloomberg 1 3 is currently generating about 0.89 per unit of risk. If you would invest  5,854  in MicroSectors FANG Index on February 18, 2025 and sell it today you would earn a total of  3,344  from holding MicroSectors FANG Index or generate 57.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

MicroSectors FANG Index  vs.  SPDR Bloomberg 1 3

MicroSectors FANG Index

Risk-Adjusted Performance

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 very healthy technical and fundamental indicators, MicroSectors FANG is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

SPDR Bloomberg 1

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg 1 3 are ranked lower than 94 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, SPDR Bloomberg is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with MicroSectors FANG and SPDR Bloomberg

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

The idea behind MicroSectors FANG Index and SPDR Bloomberg 1 3 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.