Correlation Between MicroSectors FANG and FlexShares High

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

Diversification Opportunities for MicroSectors FANG and FlexShares High

-0.8

Correlation Coefficient

MicroSectors FANG  FlexShares High

Pay attention - limited upside

The 3 months correlation between MicroSectors and FlexShares is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and FlexShares High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares High Yield 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 FlexShares High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares High Yield has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and FlexShares High go up and down completely randomly.

Pair Corralation between MicroSectors FANG and FlexShares High

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the FlexShares High. In addition to that, MicroSectors FANG is 19.67 times more volatile than FlexShares High Yield. It trades about -0.17 of its total potential returns per unit of risk. FlexShares High Yield is currently generating about 0.21 per unit of volatility. If you would invest  4,042  in FlexShares High Yield on September 2, 2024 and sell it today you would earn a total of  109.00  from holding FlexShares High Yield or generate 2.7% 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.  FlexShares High Yield

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.

FlexShares High Yield

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares High Yield are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, FlexShares High is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with MicroSectors FANG and FlexShares High

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

The idea behind MicroSectors FANG Index and FlexShares High 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.

Check out your portfolio center.

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 CEOs Directory module to screen CEOs from public companies around the world.