Correlation Between VanEck Emerging and IShares MBS

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

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

Diversification Opportunities for VanEck Emerging and IShares MBS

-0.27

Correlation Coefficient

VanEck Emerging  IShares MBS

Very good diversification

The 3 months correlation between VanEck and IShares is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Emerging Markets and iShares MBS ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MBS ETF and VanEck Emerging 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 Emerging Markets are associated (or correlated) with IShares MBS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MBS ETF has no effect on the direction of VanEck Emerging i.e., VanEck Emerging and IShares MBS go up and down completely randomly.

Pair Corralation between VanEck Emerging and IShares MBS

Given the investment horizon of 90 days VanEck Emerging Markets is expected to generate 1.0 times more return on investment than IShares MBS. However, VanEck Emerging is 1.0 times more volatile than iShares MBS ETF. It trades about 0.1 of its potential returns per unit of risk. iShares MBS ETF is currently generating about -0.09 per unit of risk. If you would invest  1,929  in VanEck Emerging Markets on September 13, 2024 and sell it today you would earn a total of  41.00  from holding VanEck Emerging Markets or generate 2.13% return on investment over 90 days.

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

VanEck Emerging Markets  vs.  iShares MBS ETF

VanEck Emerging Markets

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Emerging Markets are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, VanEck Emerging is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

iShares MBS ETF

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with VanEck Emerging and IShares MBS

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

The idea behind VanEck Emerging Markets and iShares MBS 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.