Correlation Between VanEck Vectors and Vanguard Index

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

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

Diversification Opportunities for VanEck Vectors and Vanguard Index

-0.47

Correlation Coefficient

VanEck Vectors  Vanguard Index

Very good diversification

The 3 months correlation between VanEck and Vanguard is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Vectors ETF and Vanguard Index Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Index Funds and VanEck Vectors 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 VanEck Vectors ETF are associated (or correlated) with Vanguard Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Index Funds has no effect on the direction of VanEck Vectors i.e., VanEck Vectors and Vanguard Index go up and down completely randomly.

Pair Corralation between VanEck Vectors and Vanguard Index

Assuming the 90 days trading horizon VanEck Vectors ETF is expected to under-perform the Vanguard Index. In addition to that, VanEck Vectors is 1.79 times more volatile than Vanguard Index Funds. It trades about -0.1 of its total potential returns per unit of risk. Vanguard Index Funds is currently generating about 0.1 per unit of volatility. If you would invest  573,547  in Vanguard Index Funds on October 26, 2024 and sell it today you would earn a total of  38,753  from holding Vanguard Index Funds or generate 6.76% return on investment over 90 days.

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

VanEck Vectors ETF  vs.  Vanguard Index Funds

VanEck Vectors ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Vectors ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Vanguard Index Funds

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Index Funds are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward indicators, Vanguard Index may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with VanEck Vectors and Vanguard Index

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

The idea behind VanEck Vectors ETF and Vanguard Index Funds 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.