Correlation Between IShares Global and VanEck Vectors

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

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

Diversification Opportunities for IShares Global and VanEck Vectors

0.68

Correlation Coefficient

IShares Global  VanEck Vectors

Poor diversification

The 3 months correlation between IShares and VanEck is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Clean and VanEck Vectors ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vectors ETF and IShares Global 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 Global Clean are associated (or correlated) with VanEck Vectors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Vectors ETF has no effect on the direction of IShares Global i.e., IShares Global and VanEck Vectors go up and down completely randomly.

Pair Corralation between IShares Global and VanEck Vectors

Assuming the 90 days trading horizon iShares Global Clean is expected to generate 0.45 times more return on investment than VanEck Vectors. However, iShares Global Clean is 2.21 times less risky than VanEck Vectors. It trades about -0.21 of its potential returns per unit of risk. VanEck Vectors ETF is currently generating about -0.11 per unit of risk. If you would invest  25,351  in iShares Global Clean on October 9, 2024 and sell it today you would lose (1,297) from holding iShares Global Clean or give up 5.12% of portfolio value over 90 days.

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

iShares Global Clean  vs.  VanEck Vectors ETF

iShares Global Clean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Clean has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

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 fairly strong basic indicators, VanEck Vectors 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 Global and VanEck Vectors

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

The idea behind iShares Global Clean and VanEck Vectors 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.