Correlation Between IShares UBS and VanEck Australian

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

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

Diversification Opportunities for IShares UBS and VanEck Australian

0.65

Correlation Coefficient

IShares UBS  VanEck Australian

Poor diversification

The 3 months correlation between IShares and VanEck is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding iShares UBS Government and VanEck Australian Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Australian and IShares UBS 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 UBS Government are associated (or correlated) with VanEck Australian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Australian has no effect on the direction of IShares UBS i.e., IShares UBS and VanEck Australian go up and down completely randomly.

Pair Corralation between IShares UBS and VanEck Australian

Assuming the 90 days trading horizon iShares UBS Government is expected to under-perform the VanEck Australian. In addition to that, IShares UBS is 1.13 times more volatile than VanEck Australian Corporate. It trades about -0.01 of its total potential returns per unit of risk. VanEck Australian Corporate is currently generating about 0.08 per unit of volatility. If you would invest  1,589  in VanEck Australian Corporate on October 9, 2024 and sell it today you would earn a total of  101.00  from holding VanEck Australian Corporate or generate 6.36% return on investment over 90 days.

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

iShares UBS Government  vs.  VanEck Australian Corporate

iShares UBS Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares UBS Government has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, IShares UBS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

VanEck Australian

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Australian Corporate are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, VanEck Australian 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 IShares UBS and VanEck Australian

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

The idea behind iShares UBS Government and VanEck Australian Corporate 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.