Correlation Between VanEck Brazil and Franklin FTSE

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

By analyzing existing cross correlation between VanEck Brazil Small Cap and Franklin FTSE Brazil, you can compare the effects of market volatilities on VanEck Brazil and Franklin FTSE 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 Brazil with a short position of Franklin FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Brazil and Franklin FTSE.

Diversification Opportunities for VanEck Brazil and Franklin FTSE

0.96

Correlation Coefficient

VanEck Brazil  Franklin FTSE

Almost no diversification

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

Pair Corralation between VanEck Brazil and Franklin FTSE

Considering the 90-day investment horizon VanEck Brazil Small Cap is expected to under-perform the Franklin FTSE. In addition to that, VanEck Brazil is 1.22 times more volatile than Franklin FTSE Brazil. It trades about -0.01 of its total potential returns per unit of risk. Franklin FTSE Brazil is currently generating about 0.02 per unit of volatility. If you would invest  1,500  in Franklin FTSE Brazil on December 1, 2024 and sell it today you would earn a total of  15.00  from holding Franklin FTSE Brazil or generate 1.0% return on investment over 90 days.

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

VanEck Brazil Small Cap  vs.  Franklin FTSE Brazil

VanEck Brazil Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Brazil Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VanEck Brazil is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Franklin FTSE Brazil

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin FTSE Brazil are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Franklin FTSE is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with VanEck Brazil and Franklin FTSE

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

The idea behind VanEck Brazil Small Cap and Franklin FTSE Brazil 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 CEOs Directory module to screen CEOs from public companies around the world.