Correlation Between Barclays ETN and VanEck Energy

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

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

Diversification Opportunities for Barclays ETN and VanEck Energy

0.98

Correlation Coefficient

Barclays ETN  VanEck Energy

Almost no diversification

The 3 months correlation between Barclays and VanEck is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Barclays ETN Select and VanEck Energy Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Energy Income and Barclays ETN 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 Barclays ETN Select are associated (or correlated) with VanEck Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Energy Income has no effect on the direction of Barclays ETN i.e., Barclays ETN and VanEck Energy go up and down completely randomly.

Pair Corralation between Barclays ETN and VanEck Energy

Given the investment horizon of 90 days Barclays ETN Select is expected to generate 0.79 times more return on investment than VanEck Energy. However, Barclays ETN Select is 1.27 times less risky than VanEck Energy. It trades about 0.65 of its potential returns per unit of risk. VanEck Energy Income is currently generating about 0.47 per unit of risk. If you would invest  2,638  in Barclays ETN Select on September 4, 2024 and sell it today you would earn a total of  390.00  from holding Barclays ETN Select or generate 14.78% return on investment over 90 days.

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

Barclays ETN Select  vs.  VanEck Energy Income

Barclays ETN Select

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays ETN Select are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Barclays ETN reported solid returns over the last few months and may actually be approaching a breakup point.

VanEck Energy Income

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Energy Income are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, VanEck Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barclays ETN and VanEck Energy

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

The idea behind Barclays ETN Select and VanEck Energy Income 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.