Correlation Between MegaShort Semiconductors and MegaShort

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

By analyzing existing cross correlation between MegaShort Semiconductors Daily and MegaShort SP 500, you can compare the effects of market volatilities on MegaShort Semiconductors and MegaShort 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 MegaShort Semiconductors with a short position of MegaShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of MegaShort Semiconductors and MegaShort.

Diversification Opportunities for MegaShort Semiconductors and MegaShort

0.94

Correlation Coefficient

MegaShort Semiconductors  MegaShort

Almost no diversification

The 3 months correlation between MegaShort and MegaShort is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding MegaShort Semiconductors Daily and MegaShort SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MegaShort SP 500 and MegaShort Semiconductors 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 MegaShort Semiconductors Daily are associated (or correlated) with MegaShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MegaShort SP 500 has no effect on the direction of MegaShort Semiconductors i.e., MegaShort Semiconductors and MegaShort go up and down completely randomly.

Pair Corralation between MegaShort Semiconductors and MegaShort

Assuming the 90 days trading horizon MegaShort Semiconductors Daily is expected to under-perform the MegaShort. In addition to that, MegaShort Semiconductors is 2.25 times more volatile than MegaShort SP 500. It trades about -0.32 of its total potential returns per unit of risk. MegaShort SP 500 is currently generating about -0.28 per unit of volatility. If you would invest  2,094  in MegaShort SP 500 on April 22, 2025 and sell it today you would lose (432.00) from holding MegaShort SP 500 or give up 20.63% of portfolio value over 90 days.

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

MegaShort Semiconductors Daily  vs.  MegaShort SP 500

MegaShort Semiconductors

Risk-Adjusted Performance

Very Weak

Over the last 90 days MegaShort Semiconductors Daily has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in August 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

MegaShort SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days MegaShort SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in August 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with MegaShort Semiconductors and MegaShort

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

The idea behind MegaShort Semiconductors Daily and MegaShort SP 500 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.