Correlation Between VanEck Vectors and Optica Rare

Can any of the company-specific risk be diversified away by investing in both VanEck Vectors and Optica Rare 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 Optica Rare 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 Optica Rare Earths, you can compare the effects of market volatilities on VanEck Vectors and Optica Rare 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 Optica Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Vectors and Optica Rare.

Diversification Opportunities for VanEck Vectors and Optica Rare

0.1

Correlation Coefficient

VanEck Vectors  Optica Rare

Average diversification

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

Pair Corralation between VanEck Vectors and Optica Rare

Given the investment horizon of 90 days VanEck Vectors ETF is expected to generate 1.07 times more return on investment than Optica Rare. However, VanEck Vectors is 1.07 times more volatile than Optica Rare Earths. It trades about 0.02 of its potential returns per unit of risk. Optica Rare Earths is currently generating about 0.02 per unit of risk. If you would invest  2,097  in VanEck Vectors ETF on December 29, 2024 and sell it today you would earn a total of  30.00  from holding VanEck Vectors ETF or generate 1.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.44%
Values	Daily Returns

VanEck Vectors ETF  vs.  Optica Rare Earths

VanEck Vectors ETF

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Vectors ETF are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, VanEck Vectors is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Optica Rare Earths

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Optica Rare Earths are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Optica Rare is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with VanEck Vectors and Optica Rare

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

The idea behind VanEck Vectors ETF and Optica Rare Earths 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.