Correlation Between VanEck Defense and Invesco EQQQ

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

By analyzing existing cross correlation between VanEck Defense ETF and Invesco EQQQ NASDAQ 100, you can compare the effects of market volatilities on VanEck Defense and Invesco EQQQ 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 Defense with a short position of Invesco EQQQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Defense and Invesco EQQQ.

Diversification Opportunities for VanEck Defense and Invesco EQQQ

0.68

Correlation Coefficient

VanEck Defense  Invesco EQQQ

Poor diversification

The 3 months correlation between VanEck and Invesco is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Defense ETF and Invesco EQQQ NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco EQQQ NASDAQ and VanEck Defense 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 Defense ETF are associated (or correlated) with Invesco EQQQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco EQQQ NASDAQ has no effect on the direction of VanEck Defense i.e., VanEck Defense and Invesco EQQQ go up and down completely randomly.

Pair Corralation between VanEck Defense and Invesco EQQQ

Assuming the 90 days trading horizon VanEck Defense ETF is expected to generate 0.96 times more return on investment than Invesco EQQQ. However, VanEck Defense ETF is 1.04 times less risky than Invesco EQQQ. It trades about 0.14 of its potential returns per unit of risk. Invesco EQQQ NASDAQ 100 is currently generating about 0.1 per unit of risk. If you would invest  2,333  in VanEck Defense ETF on September 28, 2024 and sell it today you would earn a total of  1,149  from holding VanEck Defense ETF or generate 49.25% return on investment over 90 days.

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

VanEck Defense ETF  vs.  Invesco EQQQ NASDAQ 100

VanEck Defense ETF

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Defense ETF are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, VanEck Defense may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco EQQQ NASDAQ

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco EQQQ NASDAQ 100 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Invesco EQQQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with VanEck Defense and Invesco EQQQ

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

The idea behind VanEck Defense ETF and Invesco EQQQ NASDAQ 100 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.