Correlation Between VanEck Vectors and VanEck Morningstar

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

By analyzing existing cross correlation between VanEck Vectors Australian and VanEck Morningstar Wide, you can compare the effects of market volatilities on VanEck Vectors and VanEck Morningstar 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 VanEck Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Vectors and VanEck Morningstar.

Diversification Opportunities for VanEck Vectors and VanEck Morningstar

0.28

Correlation Coefficient

VanEck Vectors  VanEck Morningstar

Modest diversification

The 3 months correlation between VanEck and VanEck is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Vectors Australian and VanEck Morningstar Wide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Morningstar Wide 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 Australian are associated (or correlated) with VanEck Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Morningstar Wide has no effect on the direction of VanEck Vectors i.e., VanEck Vectors and VanEck Morningstar go up and down completely randomly.

Pair Corralation between VanEck Vectors and VanEck Morningstar

Assuming the 90 days trading horizon VanEck Vectors Australian is expected to generate 1.5 times more return on investment than VanEck Morningstar. However, VanEck Vectors is 1.5 times more volatile than VanEck Morningstar Wide. It trades about 0.13 of its potential returns per unit of risk. VanEck Morningstar Wide is currently generating about 0.16 per unit of risk. If you would invest  3,065  in VanEck Vectors Australian on September 4, 2024 and sell it today you would earn a total of  291.00  from holding VanEck Vectors Australian or generate 9.49% return on investment over 90 days.

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

VanEck Vectors Australian  vs.  VanEck Morningstar Wide

VanEck Vectors Australian

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Vectors Australian are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, VanEck Vectors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

VanEck Morningstar Wide

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Morningstar Wide are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, VanEck Morningstar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with VanEck Vectors and VanEck Morningstar

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

The idea behind VanEck Vectors Australian and VanEck Morningstar Wide 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.