Correlation Between IShares Floating and VanEck Investment

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

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

Diversification Opportunities for IShares Floating and VanEck Investment

0.64

Correlation Coefficient

IShares Floating  VanEck Investment

Poor diversification

The 3 months correlation between IShares and VanEck is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding iShares Floating Rate and VanEck Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Investment Grade and IShares Floating 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 Floating Rate are associated (or correlated) with VanEck Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Investment Grade has no effect on the direction of IShares Floating i.e., IShares Floating and VanEck Investment go up and down completely randomly.

Pair Corralation between IShares Floating and VanEck Investment

Given the investment horizon of 90 days IShares Floating is expected to generate 1.05 times less return on investment than VanEck Investment. But when comparing it to its historical volatility, iShares Floating Rate is 1.58 times less risky than VanEck Investment. It trades about 0.56 of its potential returns per unit of risk. VanEck Investment Grade is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  2,524  in VanEck Investment Grade on December 29, 2024 and sell it today you would earn a total of  30.00  from holding VanEck Investment Grade or generate 1.19% return on investment over 90 days.

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

iShares Floating Rate  vs.  VanEck Investment Grade

iShares Floating Rate

Risk-Adjusted Performance

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Floating Rate are ranked lower than 43 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Floating is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

VanEck Investment Grade

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Investment Grade are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, VanEck Investment is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares Floating and VanEck Investment

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

The idea behind iShares Floating Rate and VanEck Investment Grade 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.