Correlation Between MicroSectors FANG and WisdomTree Short

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

Diversification Opportunities for MicroSectors FANG and WisdomTree Short

-0.39

Correlation Coefficient

MicroSectors FANG  WisdomTree Short

Very good diversification

The 3 months correlation between MicroSectors and WisdomTree is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and WisdomTree Short Term Corporat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Short Term 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 WisdomTree Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Short Term has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and WisdomTree Short go up and down completely randomly.

Pair Corralation between MicroSectors FANG and WisdomTree Short

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the WisdomTree Short. In addition to that, MicroSectors FANG is 18.13 times more volatile than WisdomTree Short Term Corporate. It trades about -0.17 of its total potential returns per unit of risk. WisdomTree Short Term Corporate is currently generating about 0.15 per unit of volatility. If you would invest  4,499  in WisdomTree Short Term Corporate on September 2, 2024 and sell it today you would earn a total of  94.00  from holding WisdomTree Short Term Corporate or generate 2.09% return on investment over 90 days.

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

MicroSectors FANG Index  vs.  WisdomTree Short Term Corporat

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.

WisdomTree Short Term

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Short Term Corporate are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, WisdomTree Short is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MicroSectors FANG and WisdomTree Short

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

The idea behind MicroSectors FANG Index and WisdomTree Short Term Corporate 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.