Correlation Between MicroSectors FANG and Strategy Shares

Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and Strategy Shares 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 Strategy Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MicroSectors FANG ETN and Strategy Shares, you can compare the effects of market volatilities on MicroSectors FANG and Strategy Shares 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 Strategy Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Strategy Shares.

Diversification Opportunities for MicroSectors FANG and Strategy Shares

0.92

Correlation Coefficient

MicroSectors FANG  Strategy Shares

Almost no diversification

The 3 months correlation between MicroSectors and Strategy is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG ETN and Strategy Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategy Shares 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 ETN are associated (or correlated) with Strategy Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategy Shares has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Strategy Shares go up and down completely randomly.

Pair Corralation between MicroSectors FANG and Strategy Shares

Given the investment horizon of 90 days MicroSectors FANG ETN is expected to generate 5.2 times more return on investment than Strategy Shares. However, MicroSectors FANG is 5.2 times more volatile than Strategy Shares. It trades about 0.21 of its potential returns per unit of risk. Strategy Shares is currently generating about 0.24 per unit of risk. If you would invest  5,775  in MicroSectors FANG ETN on May 11, 2025 and sell it today you would earn a total of  835.00  from holding MicroSectors FANG ETN or generate 14.46% 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 ETN  vs.  Strategy Shares

MicroSectors FANG ETN

Risk-Adjusted Performance

Solid

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

Strategy Shares

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Strategy Shares are ranked lower than 19 (%) 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.

Pair Trading with MicroSectors FANG and Strategy Shares

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

The idea behind MicroSectors FANG ETN and Strategy Shares 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.