Correlation Between Financial Investors and VanEck ETF

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

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

Diversification Opportunities for Financial Investors and VanEck ETF

0.4

Correlation Coefficient

Financial Investors  VanEck ETF

Very weak diversification

The 3 months correlation between Financial and VanEck is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Financial Investors Trust and VanEck ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck ETF Trust and Financial Investors 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 Financial Investors Trust are associated (or correlated) with VanEck ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck ETF Trust has no effect on the direction of Financial Investors i.e., Financial Investors and VanEck ETF go up and down completely randomly.

Pair Corralation between Financial Investors and VanEck ETF

Assuming the 90 days horizon Financial Investors Trust is expected to generate 0.81 times more return on investment than VanEck ETF. However, Financial Investors Trust is 1.24 times less risky than VanEck ETF. It trades about -0.07 of its potential returns per unit of risk. VanEck ETF Trust is currently generating about -0.16 per unit of risk. If you would invest  1,764  in Financial Investors Trust on December 30, 2024 and sell it today you would lose (76.00) from holding Financial Investors Trust or give up 4.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.55%
Values	Daily Returns

Financial Investors Trust  vs.  VanEck ETF Trust

Financial Investors Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Financial Investors Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Financial Investors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

VanEck ETF Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Financial Investors and VanEck ETF

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

The idea behind Financial Investors Trust and VanEck ETF Trust 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.