Correlation Between MicroSectors FANG and VictoryShares WestEnd

Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and VictoryShares WestEnd 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 VictoryShares WestEnd into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MicroSectors FANG ETN and VictoryShares WestEnd Sector, you can compare the effects of market volatilities on MicroSectors FANG and VictoryShares WestEnd 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 VictoryShares WestEnd. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and VictoryShares WestEnd.

Diversification Opportunities for MicroSectors FANG and VictoryShares WestEnd

0.87

Correlation Coefficient

MicroSectors FANG  VictoryShares WestEnd

Very poor diversification

The 3 months correlation between MicroSectors and VictoryShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG ETN and VictoryShares WestEnd Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares WestEnd 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 ETN are associated (or correlated) with VictoryShares WestEnd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares WestEnd has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and VictoryShares WestEnd go up and down completely randomly.

Pair Corralation between MicroSectors FANG and VictoryShares WestEnd

Given the investment horizon of 90 days MicroSectors FANG ETN is expected to generate 1.85 times more return on investment than VictoryShares WestEnd. However, MicroSectors FANG is 1.85 times more volatile than VictoryShares WestEnd Sector. It trades about 0.07 of its potential returns per unit of risk. VictoryShares WestEnd Sector is currently generating about 0.11 per unit of risk. If you would invest  6,688  in MicroSectors FANG ETN on August 18, 2025 and sell it today you would earn a total of  351.00  from holding MicroSectors FANG ETN or generate 5.25% return on investment over 90 days.

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

MicroSectors FANG ETN  vs.  VictoryShares WestEnd Sector

MicroSectors FANG ETN

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors FANG ETN are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, MicroSectors FANG is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

VictoryShares WestEnd

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in VictoryShares WestEnd Sector are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, VictoryShares WestEnd 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 VictoryShares WestEnd

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

The idea behind MicroSectors FANG ETN and VictoryShares WestEnd Sector 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.