Correlation Between VanEck Gaming and MicroSectors Travel

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

By analyzing existing cross correlation between VanEck Gaming ETF and MicroSectors Travel 3X, you can compare the effects of market volatilities on VanEck Gaming and MicroSectors Travel 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 Gaming with a short position of MicroSectors Travel. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Gaming and MicroSectors Travel.

Diversification Opportunities for VanEck Gaming and MicroSectors Travel

0.08

Correlation Coefficient

VanEck Gaming  MicroSectors Travel

Significant diversification

The 3 months correlation between VanEck and MicroSectors is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Gaming ETF and MicroSectors Travel 3X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Travel and VanEck Gaming 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 Gaming ETF are associated (or correlated) with MicroSectors Travel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Travel has no effect on the direction of VanEck Gaming i.e., VanEck Gaming and MicroSectors Travel go up and down completely randomly.

Pair Corralation between VanEck Gaming and MicroSectors Travel

Considering the 90-day investment horizon VanEck Gaming is expected to generate 11.98 times less return on investment than MicroSectors Travel. But when comparing it to its historical volatility, VanEck Gaming ETF is 3.34 times less risky than MicroSectors Travel. It trades about 0.02 of its potential returns per unit of risk. MicroSectors Travel 3X is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,330  in MicroSectors Travel 3X on September 26, 2024 and sell it today you would earn a total of  3,732  from holding MicroSectors Travel 3X or generate 160.17% return on investment over 90 days.

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

VanEck Gaming ETF  vs.  MicroSectors Travel 3X

VanEck Gaming ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Gaming ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking indicators, VanEck Gaming is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

MicroSectors Travel

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Travel 3X are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, MicroSectors Travel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VanEck Gaming and MicroSectors Travel

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

The idea behind VanEck Gaming ETF and MicroSectors Travel 3X 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.