Correlation Between IShares Core and VanEck Natural

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

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

Diversification Opportunities for IShares Core and VanEck Natural

-0.52

Correlation Coefficient

IShares Core  VanEck Natural

Excellent diversification

The 3 months correlation between IShares and VanEck is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and VanEck Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Natural Resources and IShares Core 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 Core SP are associated (or correlated) with VanEck Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Natural Resources has no effect on the direction of IShares Core i.e., IShares Core and VanEck Natural go up and down completely randomly.

Pair Corralation between IShares Core and VanEck Natural

Considering the 90-day investment horizon iShares Core SP is expected to generate 0.86 times more return on investment than VanEck Natural. However, iShares Core SP is 1.16 times less risky than VanEck Natural. It trades about 0.11 of its potential returns per unit of risk. VanEck Natural Resources is currently generating about -0.01 per unit of risk. If you would invest  38,803  in iShares Core SP on October 5, 2024 and sell it today you would earn a total of  19,942  from holding iShares Core SP or generate 51.39% return on investment over 90 days.

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

iShares Core SP  vs.  VanEck Natural Resources

iShares Core SP

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

VanEck Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with IShares Core and VanEck Natural

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

The idea behind iShares Core SP and VanEck Natural Resources 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.