Correlation Between IShares Real and VanEck Mortgage

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

By analyzing existing cross correlation between iShares Real Estate and VanEck Mortgage REIT, you can compare the effects of market volatilities on IShares Real and VanEck Mortgage 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 IShares Real with a short position of VanEck Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Real and VanEck Mortgage.

Diversification Opportunities for IShares Real and VanEck Mortgage

0.76

Correlation Coefficient

IShares Real  VanEck Mortgage

Poor diversification

The 3 months correlation between IShares and VanEck is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding iShares Real Estate and VanEck Mortgage REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Mortgage REIT and IShares Real 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 iShares Real Estate are associated (or correlated) with VanEck Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Mortgage REIT has no effect on the direction of IShares Real i.e., IShares Real and VanEck Mortgage go up and down completely randomly.

Pair Corralation between IShares Real and VanEck Mortgage

Considering the 90-day investment horizon iShares Real Estate is expected to under-perform the VanEck Mortgage. In addition to that, IShares Real is 1.07 times more volatile than VanEck Mortgage REIT. It trades about -0.15 of its total potential returns per unit of risk. VanEck Mortgage REIT is currently generating about -0.12 per unit of volatility. If you would invest  1,172  in VanEck Mortgage REIT on September 21, 2024 and sell it today you would lose (87.00) from holding VanEck Mortgage REIT or give up 7.42% of portfolio value over 90 days.

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

iShares Real Estate  vs.  VanEck Mortgage REIT

iShares Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

VanEck Mortgage REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Mortgage REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with IShares Real and VanEck Mortgage

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

The idea behind iShares Real Estate and VanEck Mortgage REIT 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.