Correlation Between MicroSectors FANG and Level Four

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

Diversification Opportunities for MicroSectors FANG and Level Four

-0.88

Correlation Coefficient

MicroSectors FANG  Level Four

Pay attention - limited upside

The 3 months correlation between MicroSectors and Level is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Level Four Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Level Four Large 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 Level Four. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Level Four Large has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Level Four go up and down completely randomly.

Pair Corralation between MicroSectors FANG and Level Four

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the Level Four. In addition to that, MicroSectors FANG is 3.32 times more volatile than Level Four Large. It trades about -0.11 of its total potential returns per unit of risk. Level Four Large is currently generating about 0.07 per unit of volatility. If you would invest  3,756  in Level Four Large on August 21, 2025 and sell it today you would earn a total of  168.00  from holding Level Four Large or generate 4.47% 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.  Level Four Large

MicroSectors FANG Index

Risk-Adjusted Performance

Weakest

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 conflicting performance in the last few months, the Etf's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Level Four Large

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Level Four Large are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Level Four is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MicroSectors FANG and Level Four

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

The idea behind MicroSectors FANG Index and Level Four Large 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.