Correlation Between VanEck FTSE and Ecofibre

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

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

Diversification Opportunities for VanEck FTSE and Ecofibre

-0.61

Correlation Coefficient

VanEck FTSE  Ecofibre

Excellent diversification

The 3 months correlation between VanEck and Ecofibre is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding VanEck FTSE Global and Ecofibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecofibre and VanEck FTSE 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 FTSE Global are associated (or correlated) with Ecofibre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecofibre has no effect on the direction of VanEck FTSE i.e., VanEck FTSE and Ecofibre go up and down completely randomly.

Pair Corralation between VanEck FTSE and Ecofibre

Assuming the 90 days trading horizon VanEck FTSE Global is expected to generate 0.21 times more return on investment than Ecofibre. However, VanEck FTSE Global is 4.66 times less risky than Ecofibre. It trades about 0.05 of its potential returns per unit of risk. Ecofibre is currently generating about -0.03 per unit of risk. If you would invest  2,159  in VanEck FTSE Global on December 30, 2024 and sell it today you would earn a total of  73.00  from holding VanEck FTSE Global or generate 3.38% return on investment over 90 days.

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

VanEck FTSE Global  vs.  Ecofibre

VanEck FTSE Global

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck FTSE Global are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, VanEck FTSE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Ecofibre

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ecofibre has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with VanEck FTSE and Ecofibre

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

The idea behind VanEck FTSE Global and Ecofibre 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.