Correlation Between VanEck Vectors and Vanguard Total

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

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

Diversification Opportunities for VanEck Vectors and Vanguard Total

0.96

Correlation Coefficient

VanEck Vectors  Vanguard Total

Almost no diversification

The 3 months correlation between VanEck and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Vectors MSCI and Vanguard Total Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Market 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 MSCI are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Market has no effect on the direction of VanEck Vectors i.e., VanEck Vectors and Vanguard Total go up and down completely randomly.

Pair Corralation between VanEck Vectors and Vanguard Total

Assuming the 90 days trading horizon VanEck Vectors is expected to generate 1.17 times less return on investment than Vanguard Total. But when comparing it to its historical volatility, VanEck Vectors MSCI is 1.12 times less risky than Vanguard Total. It trades about 0.24 of its potential returns per unit of risk. Vanguard Total Market is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  45,561  in Vanguard Total Market on September 25, 2024 and sell it today you would earn a total of  1,654  from holding Vanguard Total Market or generate 3.63% 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 MSCI  vs.  Vanguard Total Market

VanEck Vectors MSCI

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Vectors MSCI 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.

Vanguard Total Market

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Market are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard Total unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VanEck Vectors and Vanguard Total

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

The idea behind VanEck Vectors MSCI and Vanguard Total Market 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.

Check out your portfolio center.

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.