Correlation Between VanEck JP and VanEck China

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

By analyzing existing cross correlation between VanEck JP Morgan and VanEck China Bond, you can compare the effects of market volatilities on VanEck JP and VanEck China 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 JP with a short position of VanEck China. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck JP and VanEck China.

Diversification Opportunities for VanEck JP and VanEck China

0.86

Correlation Coefficient

VanEck JP  VanEck China

Very poor diversification

The 3 months correlation between VanEck and VanEck is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding VanEck JP Morgan and VanEck China Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck China Bond and VanEck JP 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 JP Morgan are associated (or correlated) with VanEck China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck China Bond has no effect on the direction of VanEck JP i.e., VanEck JP and VanEck China go up and down completely randomly.

Pair Corralation between VanEck JP and VanEck China

Given the investment horizon of 90 days VanEck JP Morgan is expected to under-perform the VanEck China. In addition to that, VanEck JP is 1.42 times more volatile than VanEck China Bond. It trades about -0.05 of its total potential returns per unit of risk. VanEck China Bond is currently generating about -0.04 per unit of volatility. If you would invest  2,233  in VanEck China Bond on September 3, 2024 and sell it today you would lose (19.00) from holding VanEck China Bond or give up 0.85% of portfolio value over 90 days.

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

VanEck JP Morgan  vs.  VanEck China Bond

VanEck JP Morgan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck JP Morgan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, VanEck JP is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

VanEck China Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck China Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, VanEck China is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with VanEck JP and VanEck China

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

The idea behind VanEck JP Morgan and VanEck China Bond 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.