Correlation Between IShares II and VanEck Multi

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

By analyzing existing cross correlation between iShares II Public and VanEck Multi Asset Balanced, you can compare the effects of market volatilities on IShares II and VanEck Multi 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 IShares II with a short position of VanEck Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares II and VanEck Multi.

Diversification Opportunities for IShares II and VanEck Multi

-0.1

Correlation Coefficient

IShares II  VanEck Multi

Good diversification

The 3 months correlation between IShares and VanEck is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding iShares II Public and VanEck Multi Asset Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Multi Asset and IShares II 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 iShares II Public are associated (or correlated) with VanEck Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Multi Asset has no effect on the direction of IShares II i.e., IShares II and VanEck Multi go up and down completely randomly.

Pair Corralation between IShares II and VanEck Multi

Assuming the 90 days trading horizon IShares II is expected to generate 2.25 times less return on investment than VanEck Multi. In addition to that, IShares II is 2.3 times more volatile than VanEck Multi Asset Balanced. It trades about 0.04 of its total potential returns per unit of risk. VanEck Multi Asset Balanced is currently generating about 0.2 per unit of volatility. If you would invest  6,938  in VanEck Multi Asset Balanced on September 5, 2024 and sell it today you would earn a total of  383.00  from holding VanEck Multi Asset Balanced or generate 5.52% return on investment over 90 days.

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

iShares II Public  vs.  VanEck Multi Asset Balanced

iShares II Public

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares II Public are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares II is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

VanEck Multi Asset

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Multi Asset Balanced are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, VanEck Multi 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 IShares II and VanEck Multi

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

The idea behind iShares II Public and VanEck Multi Asset Balanced 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..