Correlation Between MicroSectors FANG and ALPS Clean

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

Diversification Opportunities for MicroSectors FANG and ALPS Clean

-0.84

Correlation Coefficient

MicroSectors FANG  ALPS Clean

Pay attention - limited upside

The 3 months correlation between MicroSectors and ALPS is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and ALPS Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS Clean Energy 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 ALPS Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS Clean Energy has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and ALPS Clean go up and down completely randomly.

Pair Corralation between MicroSectors FANG and ALPS Clean

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the ALPS Clean. In addition to that, MicroSectors FANG is 1.68 times more volatile than ALPS Clean Energy. It trades about -0.3 of its total potential returns per unit of risk. ALPS Clean Energy is currently generating about 0.19 per unit of volatility. If you would invest  2,325  in ALPS Clean Energy on April 29, 2025 and sell it today you would earn a total of  551.00  from holding ALPS Clean Energy or generate 23.7% 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.  ALPS Clean Energy

MicroSectors FANG Index

Risk-Adjusted Performance

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 August 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

ALPS Clean Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ALPS Clean Energy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, ALPS Clean unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MicroSectors FANG and ALPS Clean

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

The idea behind MicroSectors FANG Index and ALPS Clean Energy 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..