Correlation Between MicroSectors FANG and Nicholas Global

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

Diversification Opportunities for MicroSectors FANG and Nicholas Global

0.94

Correlation Coefficient

MicroSectors FANG  Nicholas Global

Almost no diversification

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

Pair Corralation between MicroSectors FANG and Nicholas Global

Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 6.19 times more return on investment than Nicholas Global. However, MicroSectors FANG is 6.19 times more volatile than Nicholas Global Equity. It trades about 0.19 of its potential returns per unit of risk. Nicholas Global Equity is currently generating about 0.15 per unit of risk. If you would invest  38,831  in MicroSectors FANG Index on September 12, 2024 and sell it today you would earn a total of  18,917  from holding MicroSectors FANG Index or generate 48.72% return on investment over 90 days.

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

MicroSectors FANG Index  vs.  Nicholas Global Equity

MicroSectors FANG Index

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors FANG Index are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, MicroSectors FANG unveiled solid returns over the last few months and may actually be approaching a breakup point.

Nicholas Global Equity

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with MicroSectors FANG and Nicholas Global

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

The idea behind MicroSectors FANG Index and Nicholas Global Equity 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.