Correlation Between IShares Global and VanEck Environmental

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

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

Diversification Opportunities for IShares Global and VanEck Environmental

0.76

Correlation Coefficient

IShares Global  VanEck Environmental

Poor diversification

The 3 months correlation between IShares and VanEck is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Industrials and VanEck Environmental Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Environmental and IShares Global 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 Global Industrials are associated (or correlated) with VanEck Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Environmental has no effect on the direction of IShares Global i.e., IShares Global and VanEck Environmental go up and down completely randomly.

Pair Corralation between IShares Global and VanEck Environmental

Considering the 90-day investment horizon IShares Global is expected to generate 1.01 times less return on investment than VanEck Environmental. But when comparing it to its historical volatility, iShares Global Industrials is 1.23 times less risky than VanEck Environmental. It trades about 0.11 of its potential returns per unit of risk. VanEck Environmental Services is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  17,639  in VanEck Environmental Services on September 12, 2024 and sell it today you would earn a total of  854.00  from holding VanEck Environmental Services or generate 4.84% return on investment over 90 days.

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

iShares Global Industrials  vs.  VanEck Environmental Services

iShares Global Indus

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Industrials are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, IShares Global is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

VanEck Environmental

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Environmental Services are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, VanEck Environmental is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Global and VanEck Environmental

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

The idea behind iShares Global Industrials and VanEck Environmental Services 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.