Correlation Between VanEck Defense and WisdomTree Renewable

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

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

Diversification Opportunities for VanEck Defense and WisdomTree Renewable

-0.51

Correlation Coefficient

VanEck Defense  WisdomTree Renewable

Excellent diversification

The 3 months correlation between VanEck and WisdomTree is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Defense ETF and WisdomTree Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Renewable and VanEck Defense 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 Defense ETF are associated (or correlated) with WisdomTree Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Renewable has no effect on the direction of VanEck Defense i.e., VanEck Defense and WisdomTree Renewable go up and down completely randomly.

Pair Corralation between VanEck Defense and WisdomTree Renewable

Assuming the 90 days trading horizon VanEck Defense ETF is expected to generate 0.97 times more return on investment than WisdomTree Renewable. However, VanEck Defense ETF is 1.03 times less risky than WisdomTree Renewable. It trades about 0.14 of its potential returns per unit of risk. WisdomTree Renewable Energy is currently generating about -0.07 per unit of risk. If you would invest  3,079  in VanEck Defense ETF on September 26, 2024 and sell it today you would earn a total of  403.00  from holding VanEck Defense ETF or generate 13.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

VanEck Defense ETF  vs.  WisdomTree Renewable Energy

VanEck Defense ETF

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Defense ETF are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, VanEck Defense exhibited solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree Renewable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Renewable Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with VanEck Defense and WisdomTree Renewable

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

The idea behind VanEck Defense ETF and WisdomTree Renewable 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..