Correlation Between CD Private and VanEck FTSE

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

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

Diversification Opportunities for CD Private and VanEck FTSE

0.48

Correlation Coefficient

CD Private  VanEck FTSE

Very weak diversification

The 3 months correlation between CD3 and VanEck is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding CD Private Equity and VanEck FTSE China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck FTSE China and CD Private 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 CD Private Equity are associated (or correlated) with VanEck FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck FTSE China has no effect on the direction of CD Private i.e., CD Private and VanEck FTSE go up and down completely randomly.

Pair Corralation between CD Private and VanEck FTSE

Assuming the 90 days trading horizon CD Private is expected to generate 9.21 times less return on investment than VanEck FTSE. But when comparing it to its historical volatility, CD Private Equity is 1.36 times less risky than VanEck FTSE. It trades about 0.02 of its potential returns per unit of risk. VanEck FTSE China is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,671  in VanEck FTSE China on September 12, 2024 and sell it today you would earn a total of  1,182  from holding VanEck FTSE China or generate 25.31% return on investment over 90 days.

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

CD Private Equity  vs.  VanEck FTSE China

CD Private Equity

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CD Private Equity are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CD Private is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

VanEck FTSE China

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck FTSE China are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, VanEck FTSE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CD Private and VanEck FTSE

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

The idea behind CD Private Equity and VanEck FTSE China 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.