Correlation Between Vanguard and VanEck Polkadot

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

By analyzing existing cross correlation between Vanguard SP 500 and VanEck Polkadot ETN, you can compare the effects of market volatilities on Vanguard and VanEck Polkadot 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 Vanguard with a short position of VanEck Polkadot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and VanEck Polkadot.

Diversification Opportunities for Vanguard and VanEck Polkadot

0.63

Correlation Coefficient

Vanguard  VanEck Polkadot

Poor diversification

The 3 months correlation between Vanguard and VanEck is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and VanEck Polkadot ETN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Polkadot ETN and Vanguard 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 Vanguard SP 500 are associated (or correlated) with VanEck Polkadot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Polkadot ETN has no effect on the direction of Vanguard i.e., Vanguard and VanEck Polkadot go up and down completely randomly.

Pair Corralation between Vanguard and VanEck Polkadot

Assuming the 90 days trading horizon Vanguard is expected to generate 11.63 times less return on investment than VanEck Polkadot. But when comparing it to its historical volatility, Vanguard SP 500 is 11.31 times less risky than VanEck Polkadot. It trades about 0.39 of its potential returns per unit of risk. VanEck Polkadot ETN is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  118.00  in VanEck Polkadot ETN on September 5, 2024 and sell it today you would earn a total of  183.00  from holding VanEck Polkadot ETN or generate 155.08% return on investment over 90 days.

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

Vanguard SP 500  vs.  VanEck Polkadot ETN

Vanguard SP 500

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard unveiled solid returns over the last few months and may actually be approaching a breakup point.

VanEck Polkadot ETN

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Polkadot ETN are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, VanEck Polkadot unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard and VanEck Polkadot

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

The idea behind Vanguard SP 500 and VanEck Polkadot ETN 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.