Correlation Between VanEck Defense and Source Markets

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

Diversification Opportunities for VanEck Defense and Source Markets

-0.44

Correlation Coefficient

VanEck Defense  Source Markets

Very good diversification

The 3 months correlation between VanEck and Source is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Defense ETF and Source Markets plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Source Markets plc 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 Source Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Source Markets plc has no effect on the direction of VanEck Defense i.e., VanEck Defense and Source Markets go up and down completely randomly.

Pair Corralation between VanEck Defense and Source Markets

Assuming the 90 days trading horizon VanEck Defense ETF is expected to generate 0.81 times more return on investment than Source Markets. However, VanEck Defense ETF is 1.23 times less risky than Source Markets. It trades about 0.13 of its potential returns per unit of risk. Source Markets plc is currently generating about -0.05 per unit of risk. If you would invest  2,861  in VanEck Defense ETF on September 30, 2024 and sell it today you would earn a total of  620.00  from holding VanEck Defense ETF or generate 21.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

VanEck Defense ETF  vs.  Source Markets plc

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.

Source Markets plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Source Markets plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Pair Trading with VanEck Defense and Source Markets

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

The idea behind VanEck Defense ETF and Source Markets plc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.