Correlation Between SSIAM VNX50 and Van Dien

Can any of the company-specific risk be diversified away by investing in both SSIAM VNX50 and Van Dien 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 SSIAM VNX50 and Van Dien into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SSIAM VNX50 ETF and Van Dien Fused, you can compare the effects of market volatilities on SSIAM VNX50 and Van Dien 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 SSIAM VNX50 with a short position of Van Dien. Check out your portfolio center. Please also check ongoing floating volatility patterns of SSIAM VNX50 and Van Dien.

Diversification Opportunities for SSIAM VNX50 and Van Dien

-0.1

Correlation Coefficient

SSIAM VNX50  Van Dien

Good diversification

The 3 months correlation between SSIAM and Van is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding SSIAM VNX50 ETF and Van Dien Fused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Van Dien Fused and SSIAM VNX50 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 SSIAM VNX50 ETF are associated (or correlated) with Van Dien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Van Dien Fused has no effect on the direction of SSIAM VNX50 i.e., SSIAM VNX50 and Van Dien go up and down completely randomly.

Pair Corralation between SSIAM VNX50 and Van Dien

Assuming the 90 days trading horizon SSIAM VNX50 ETF is expected to under-perform the Van Dien. But the etf apears to be less risky and, when comparing its historical volatility, SSIAM VNX50 ETF is 5.76 times less risky than Van Dien. The etf trades about -0.04 of its potential returns per unit of risk. The Van Dien Fused is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,335,000  in Van Dien Fused on October 22, 2024 and sell it today you would lose (5,000) from holding Van Dien Fused or give up 0.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.0%
Values	Daily Returns

SSIAM VNX50 ETF  vs.  Van Dien Fused

SSIAM VNX50 ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SSIAM VNX50 ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SSIAM VNX50 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Van Dien Fused

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Van Dien Fused has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Van Dien is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SSIAM VNX50 and Van Dien

The main advantage of trading using opposite SSIAM VNX50 and Van Dien positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSIAM VNX50 position performs unexpectedly, Van Dien 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 Van Dien will offset losses from the drop in Van Dien's long position.

The idea behind SSIAM VNX50 ETF and Van Dien Fused 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.