Correlation Between MicroSectors FANG and VanEck Digital

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

Diversification Opportunities for MicroSectors FANG and VanEck Digital

-0.87

Correlation Coefficient

MicroSectors FANG  VanEck Digital

Pay attention - limited upside

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

Pair Corralation between MicroSectors FANG and VanEck Digital

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the VanEck Digital. But the etf apears to be less risky and, when comparing its historical volatility, MicroSectors FANG Index is 1.27 times less risky than VanEck Digital. The etf trades about -0.2 of its potential returns per unit of risk. The VanEck Digital Transformation is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,175  in VanEck Digital Transformation on September 26, 2024 and sell it today you would earn a total of  349.00  from holding VanEck Digital Transformation or generate 29.7% return on investment over 90 days.

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

MicroSectors FANG Index  vs.  VanEck Digital Transformation

MicroSectors FANG Index

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Etf's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

VanEck Digital Trans

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Digital Transformation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, VanEck Digital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MicroSectors FANG and VanEck Digital

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

The idea behind MicroSectors FANG Index and VanEck Digital Transformation 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.