Correlation Between VanEck Biotech and Vanguard Consumer

Can any of the company-specific risk be diversified away by investing in both VanEck Biotech and Vanguard Consumer 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 VanEck Biotech and Vanguard Consumer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VanEck Biotech ETF and Vanguard Consumer Staples, you can compare the effects of market volatilities on VanEck Biotech and Vanguard Consumer 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 VanEck Biotech with a short position of Vanguard Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Biotech and Vanguard Consumer.

Diversification Opportunities for VanEck Biotech and Vanguard Consumer

0.01

Correlation Coefficient

VanEck Biotech  Vanguard Consumer

Significant diversification

The 3 months correlation between VanEck and Vanguard is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Biotech ETF and Vanguard Consumer Staples in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Consumer Staples and VanEck Biotech 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 VanEck Biotech ETF are associated (or correlated) with Vanguard Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Consumer Staples has no effect on the direction of VanEck Biotech i.e., VanEck Biotech and Vanguard Consumer go up and down completely randomly.

Pair Corralation between VanEck Biotech and Vanguard Consumer

Considering the 90-day investment horizon VanEck Biotech ETF is expected to under-perform the Vanguard Consumer. In addition to that, VanEck Biotech is 1.89 times more volatile than Vanguard Consumer Staples. It trades about -0.1 of its total potential returns per unit of risk. Vanguard Consumer Staples is currently generating about 0.07 per unit of volatility. If you would invest  21,771  in Vanguard Consumer Staples on September 5, 2024 and sell it today you would earn a total of  501.00  from holding Vanguard Consumer Staples or generate 2.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

VanEck Biotech ETF  vs.  Vanguard Consumer Staples

VanEck Biotech ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Biotech ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Etf's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Vanguard Consumer Staples

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Consumer Staples are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Vanguard Consumer is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with VanEck Biotech and Vanguard Consumer

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

The idea behind VanEck Biotech ETF and Vanguard Consumer Staples 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..