Correlation Between IShares GNMA and VanEck Green

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

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

Diversification Opportunities for IShares GNMA and VanEck Green

0.98

Correlation Coefficient

IShares GNMA  VanEck Green

Almost no diversification

The 3 months correlation between IShares and VanEck is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares GNMA Bond and VanEck Green Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Green Bond and IShares GNMA 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 GNMA Bond are associated (or correlated) with VanEck Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Green Bond has no effect on the direction of IShares GNMA i.e., IShares GNMA and VanEck Green go up and down completely randomly.

Pair Corralation between IShares GNMA and VanEck Green

Given the investment horizon of 90 days IShares GNMA is expected to generate 2.0 times less return on investment than VanEck Green. In addition to that, IShares GNMA is 1.47 times more volatile than VanEck Green Bond. It trades about 0.02 of its total potential returns per unit of risk. VanEck Green Bond is currently generating about 0.05 per unit of volatility. If you would invest  2,186  in VanEck Green Bond on September 29, 2024 and sell it today you would earn a total of  185.00  from holding VanEck Green Bond or generate 8.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

iShares GNMA Bond  vs.  VanEck Green Bond

iShares GNMA Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares GNMA Bond has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, IShares GNMA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

VanEck Green Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares GNMA and VanEck Green

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

The idea behind iShares GNMA Bond and VanEck Green Bond 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 Commodity Directory module to find actively traded commodities issued by global exchanges.