Correlation Between Strategy Shares and MicroSectors FANG

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Can any of the company-specific risk be diversified away by investing in both Strategy Shares and MicroSectors FANG 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 Strategy Shares and MicroSectors FANG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategy Shares and MicroSectors FANG Index, you can compare the effects of market volatilities on Strategy Shares and MicroSectors FANG 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 Strategy Shares with a short position of MicroSectors FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategy Shares and MicroSectors FANG.

Diversification Opportunities for Strategy Shares and MicroSectors FANG

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Strategy and MicroSectors is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Strategy Shares and MicroSectors FANG Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG Index and Strategy Shares 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 Strategy Shares are associated (or correlated) with MicroSectors FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG Index has no effect on the direction of Strategy Shares i.e., Strategy Shares and MicroSectors FANG go up and down completely randomly.

Pair Corralation between Strategy Shares and MicroSectors FANG

Given the investment horizon of 90 days Strategy Shares is expected to generate 28.59 times more return on investment than MicroSectors FANG. However, Strategy Shares is 28.59 times more volatile than MicroSectors FANG Index. It trades about 0.1 of its potential returns per unit of risk. MicroSectors FANG Index is currently generating about 0.07 per unit of risk. If you would invest  0.00  in Strategy Shares on April 9, 2025 and sell it today you would earn a total of  2,532  from holding Strategy Shares or generate 9.223372036854776E16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy20.04%
ValuesDaily Returns

Strategy Shares  vs.  MicroSectors FANG Index

 Performance 
       Timeline  
Strategy Shares 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Strategy Shares are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Strategy Shares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
MicroSectors FANG Index 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors FANG Index are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, MicroSectors FANG displayed solid returns over the last few months and may actually be approaching a breakup point.

Strategy Shares and MicroSectors FANG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Strategy Shares and MicroSectors FANG

The main advantage of trading using opposite Strategy Shares and MicroSectors FANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategy Shares position performs unexpectedly, MicroSectors FANG 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 MicroSectors FANG will offset losses from the drop in MicroSectors FANG's long position.
The idea behind Strategy Shares and MicroSectors FANG Index 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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