Correlation Between VanEck Vectors and WisdomTree Corporate

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

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

Diversification Opportunities for VanEck Vectors and WisdomTree Corporate

0.94

Correlation Coefficient

VanEck Vectors  WisdomTree Corporate

Almost no diversification

The 3 months correlation between VanEck and WisdomTree is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Vectors Moodys and WisdomTree Corporate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Corporate Bond and VanEck Vectors 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 Vectors Moodys are associated (or correlated) with WisdomTree Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Corporate Bond has no effect on the direction of VanEck Vectors i.e., VanEck Vectors and WisdomTree Corporate go up and down completely randomly.

Pair Corralation between VanEck Vectors and WisdomTree Corporate

Given the investment horizon of 90 days VanEck Vectors Moodys is expected to generate 1.01 times more return on investment than WisdomTree Corporate. However, VanEck Vectors is 1.01 times more volatile than WisdomTree Corporate Bond. It trades about 0.01 of its potential returns per unit of risk. WisdomTree Corporate Bond is currently generating about -0.01 per unit of risk. If you would invest  2,154  in VanEck Vectors Moodys on August 30, 2024 and sell it today you would earn a total of  4.00  from holding VanEck Vectors Moodys or generate 0.19% return on investment over 90 days.

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

VanEck Vectors Moodys  vs.  WisdomTree Corporate Bond

VanEck Vectors Moodys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Vectors Moodys has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, VanEck Vectors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

WisdomTree Corporate Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Corporate Bond has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, WisdomTree Corporate is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with VanEck Vectors and WisdomTree Corporate

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

The idea behind VanEck Vectors Moodys and WisdomTree Corporate 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.