Correlation Between VanEck Defense and VanEck Vectors

Can any of the company-specific risk be diversified away by investing in both VanEck Defense and VanEck Vectors 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 VanEck Vectors 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 VanEck Vectors Morningstar, you can compare the effects of market volatilities on VanEck Defense and VanEck Vectors 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 VanEck Vectors. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Defense and VanEck Vectors.

Diversification Opportunities for VanEck Defense and VanEck Vectors

-0.47

Correlation Coefficient

VanEck Defense  VanEck Vectors

Very good diversification

The 3 months correlation between VanEck and VanEck is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Defense ETF and VanEck Vectors Morningstar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vectors Morni 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 VanEck Vectors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Vectors Morni has no effect on the direction of VanEck Defense i.e., VanEck Defense and VanEck Vectors go up and down completely randomly.

Pair Corralation between VanEck Defense and VanEck Vectors

Assuming the 90 days trading horizon VanEck Defense ETF is expected to generate 0.5 times more return on investment than VanEck Vectors. However, VanEck Defense ETF is 2.0 times less risky than VanEck Vectors. It trades about 0.14 of its potential returns per unit of risk. VanEck Vectors Morningstar is currently generating about 0.01 per unit of risk. If you would invest  1,853  in VanEck Defense ETF on September 28, 2024 and sell it today you would earn a total of  1,629  from holding VanEck Defense ETF or generate 87.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	87.67%
Values	Daily Returns

VanEck Defense ETF  vs.  VanEck Vectors Morningstar

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.

VanEck Vectors Morni

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Vectors Morningstar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, VanEck Vectors is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with VanEck Defense and VanEck Vectors

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

The idea behind VanEck Defense ETF and VanEck Vectors Morningstar 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.