Correlation Between Van Eck and Vanguard Total

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

By analyzing existing cross correlation between Van Eck and Vanguard Total Stock, you can compare the effects of market volatilities on Van Eck and Vanguard Total 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 Van Eck with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Van Eck and Vanguard Total.

Diversification Opportunities for Van Eck and Vanguard Total

0.79

Correlation Coefficient

Van Eck  Vanguard Total

Poor diversification

The 3 months correlation between Van and Vanguard is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Van Eck and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock and Van Eck 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 Van Eck are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of Van Eck i.e., Van Eck and Vanguard Total go up and down completely randomly.

Pair Corralation between Van Eck and Vanguard Total

Considering the 90-day investment horizon Van Eck is expected to generate 2.17 times less return on investment than Vanguard Total. But when comparing it to its historical volatility, Van Eck is 2.02 times less risky than Vanguard Total. It trades about 0.14 of its potential returns per unit of risk. Vanguard Total Stock is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  22,650  in Vanguard Total Stock on September 4, 2024 and sell it today you would earn a total of  7,393  from holding Vanguard Total Stock or generate 32.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.83%
Values	Daily Returns

Van Eck  vs.  Vanguard Total Stock

Van Eck

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Van Eck has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Van Eck is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Vanguard Total Stock

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Van Eck and Vanguard Total

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

The idea behind Van Eck and Vanguard Total Stock 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.