Correlation Between VanEck Energy and Global X

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

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

Diversification Opportunities for VanEck Energy and Global X

0.88

Correlation Coefficient

VanEck Energy  Global X

Very poor diversification

The 3 months correlation between VanEck and Global is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Energy Income and Global X MLP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X MLP and VanEck Energy 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 Energy Income are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X MLP has no effect on the direction of VanEck Energy i.e., VanEck Energy and Global X go up and down completely randomly.

Pair Corralation between VanEck Energy and Global X

Given the investment horizon of 90 days VanEck Energy Income is expected to under-perform the Global X. In addition to that, VanEck Energy is 1.49 times more volatile than Global X MLP. It trades about 0.0 of its total potential returns per unit of risk. Global X MLP is currently generating about 0.18 per unit of volatility. If you would invest  4,822  in Global X MLP on September 12, 2024 and sell it today you would earn a total of  173.00  from holding Global X MLP or generate 3.59% return on investment over 90 days.

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

VanEck Energy Income  vs.  Global X MLP

VanEck Energy Income

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Energy Income are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, VanEck Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Global X MLP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X MLP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Global X is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VanEck Energy and Global X

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

The idea behind VanEck Energy Income and Global X MLP 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.