Correlation Between IShares Core and VanEck Inflation

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

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

Diversification Opportunities for IShares Core and VanEck Inflation

0.52

Correlation Coefficient

IShares Core  VanEck Inflation

Very weak diversification

The 3 months correlation between IShares and VanEck is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Growth and VanEck Inflation Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Inflation All and IShares Core 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 Core Growth are associated (or correlated) with VanEck Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Inflation All has no effect on the direction of IShares Core i.e., IShares Core and VanEck Inflation go up and down completely randomly.

Pair Corralation between IShares Core and VanEck Inflation

Considering the 90-day investment horizon IShares Core is expected to generate 2.2 times less return on investment than VanEck Inflation. But when comparing it to its historical volatility, iShares Core Growth is 1.58 times less risky than VanEck Inflation. It trades about 0.1 of its potential returns per unit of risk. VanEck Inflation Allocation is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,819  in VanEck Inflation Allocation on September 13, 2024 and sell it today you would earn a total of  158.00  from holding VanEck Inflation Allocation or generate 5.6% return on investment over 90 days.

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

iShares Core Growth  vs.  VanEck Inflation Allocation

iShares Core Growth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Growth are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

VanEck Inflation All

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Inflation Allocation are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, VanEck Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and VanEck Inflation

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

The idea behind iShares Core Growth and VanEck Inflation Allocation 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.