Correlation Between Global X and VanEck Rare

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

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

Diversification Opportunities for Global X and VanEck Rare

0.81

Correlation Coefficient

Global X  VanEck Rare

Very poor diversification

The 3 months correlation between Global and VanEck is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Global X Copper and VanEck Rare EarthStrategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Rare EarthStr and Global X 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 Global X Copper are associated (or correlated) with VanEck Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Rare EarthStr has no effect on the direction of Global X i.e., Global X and VanEck Rare go up and down completely randomly.

Pair Corralation between Global X and VanEck Rare

Given the investment horizon of 90 days Global X Copper is expected to generate 1.29 times more return on investment than VanEck Rare. However, Global X is 1.29 times more volatile than VanEck Rare EarthStrategic. It trades about 0.12 of its potential returns per unit of risk. VanEck Rare EarthStrategic is currently generating about 0.14 per unit of risk. If you would invest  3,778  in Global X Copper on December 19, 2024 and sell it today you would earn a total of  487.00  from holding Global X Copper or generate 12.89% return on investment over 90 days.

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

Global X Copper  vs.  VanEck Rare EarthStrategic

Global X Copper

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Copper are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Global X showed solid returns over the last few months and may actually be approaching a breakup point.

VanEck Rare EarthStr

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Rare EarthStrategic are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, VanEck Rare showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global X and VanEck Rare

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

The idea behind Global X Copper and VanEck Rare EarthStrategic 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.