Correlation Between MegaShort and Tech Innovators

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

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

Diversification Opportunities for MegaShort and Tech Innovators

0.25

Correlation Coefficient

MegaShort  Tech Innovators

Modest diversification

The 3 months correlation between MegaShort and Tech is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding MegaShort SP 500 and Tech Innovators Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tech Innovators Yield and MegaShort 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 SP 500 are associated (or correlated) with Tech Innovators. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tech Innovators Yield has no effect on the direction of MegaShort i.e., MegaShort and Tech Innovators go up and down completely randomly.

Pair Corralation between MegaShort and Tech Innovators

Assuming the 90 days trading horizon MegaShort SP 500 is expected to under-perform the Tech Innovators. In addition to that, MegaShort is 1.38 times more volatile than Tech Innovators Yield. It trades about -0.29 of its total potential returns per unit of risk. Tech Innovators Yield is currently generating about 0.31 per unit of volatility. If you would invest  1,515  in Tech Innovators Yield on April 23, 2025 and sell it today you would earn a total of  450.00  from holding Tech Innovators Yield or generate 29.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	66.13%
Values	Daily Returns

MegaShort SP 500  vs.  Tech Innovators Yield

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.

Tech Innovators Yield

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tech Innovators Yield are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Tech Innovators exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MegaShort and Tech Innovators

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

The idea behind MegaShort SP 500 and Tech Innovators Yield 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.