Correlation Between MicroSectors Travel and VanEck Gaming

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

By analyzing existing cross correlation between MicroSectors Travel 3X and VanEck Gaming ETF, you can compare the effects of market volatilities on MicroSectors Travel and VanEck Gaming 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 MicroSectors Travel with a short position of VanEck Gaming. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors Travel and VanEck Gaming.

Diversification Opportunities for MicroSectors Travel and VanEck Gaming

0.08

Correlation Coefficient

MicroSectors Travel  VanEck Gaming

Significant diversification

The 3 months correlation between MicroSectors and VanEck is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Travel 3X and VanEck Gaming ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Gaming ETF and MicroSectors Travel 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 MicroSectors Travel 3X are associated (or correlated) with VanEck Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Gaming ETF has no effect on the direction of MicroSectors Travel i.e., MicroSectors Travel and VanEck Gaming go up and down completely randomly.

Pair Corralation between MicroSectors Travel and VanEck Gaming

Given the investment horizon of 90 days MicroSectors Travel 3X is expected to generate 3.34 times more return on investment than VanEck Gaming. However, MicroSectors Travel is 3.34 times more volatile than VanEck Gaming ETF. It trades about 0.07 of its potential returns per unit of risk. VanEck Gaming ETF is currently generating about 0.02 per unit of risk. If you would invest  2,330  in MicroSectors Travel 3X on September 26, 2024 and sell it today you would earn a total of  3,732  from holding MicroSectors Travel 3X or generate 160.17% return on investment over 90 days.

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

MicroSectors Travel 3X  vs.  VanEck Gaming ETF

MicroSectors Travel

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Travel 3X are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, MicroSectors Travel unveiled solid returns over the last few months and may actually be approaching a breakup point.

VanEck Gaming ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Gaming ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking indicators, VanEck Gaming is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with MicroSectors Travel and VanEck Gaming

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

The idea behind MicroSectors Travel 3X and VanEck Gaming ETF 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.