Correlation Between MicroSectors FANG and MicroSectors Gold

Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and MicroSectors Gold 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 MicroSectors Gold 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 MicroSectors Gold 3X, you can compare the effects of market volatilities on MicroSectors FANG and MicroSectors Gold 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 MicroSectors Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and MicroSectors Gold.

Diversification Opportunities for MicroSectors FANG and MicroSectors Gold

-0.34

Correlation Coefficient

MicroSectors FANG  MicroSectors Gold

Very good diversification

The 3 months correlation between MicroSectors and MicroSectors is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and MicroSectors Gold 3X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Gold 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 MicroSectors Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Gold has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and MicroSectors Gold go up and down completely randomly.

Pair Corralation between MicroSectors FANG and MicroSectors Gold

Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 0.64 times more return on investment than MicroSectors Gold. However, MicroSectors FANG Index is 1.56 times less risky than MicroSectors Gold. It trades about 0.22 of its potential returns per unit of risk. MicroSectors Gold 3X is currently generating about -0.07 per unit of risk. If you would invest  8,620  in MicroSectors FANG Index on May 10, 2025 and sell it today you would earn a total of  2,453  from holding MicroSectors FANG Index or generate 28.46% 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.  MicroSectors Gold 3X

MicroSectors FANG Index

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors FANG Index are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, MicroSectors FANG displayed solid returns over the last few months and may actually be approaching a breakup point.

MicroSectors Gold

Risk-Adjusted Performance

Weakest

Over the last 90 days MicroSectors Gold 3X has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's essential indicators remain quite persistent which may send shares a bit higher in September 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

Pair Trading with MicroSectors FANG and MicroSectors Gold

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

The idea behind MicroSectors FANG Index and MicroSectors Gold 3X 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.