Correlation Between IShares SP and VanEck Rare

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

By analyzing existing cross correlation between iShares SP 500 and VanEck Rare EarthStrategic, you can compare the effects of market volatilities on IShares SP and VanEck Rare 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 SP with a short position of VanEck Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and VanEck Rare.

Diversification Opportunities for IShares SP and VanEck Rare

-0.75

Correlation Coefficient

IShares SP  VanEck Rare

Pay attention - limited upside

The 3 months correlation between IShares and VanEck is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and VanEck Rare EarthStrategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Rare EarthStr and IShares SP 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 SP 500 are associated (or correlated) with VanEck Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Rare EarthStr has no effect on the direction of IShares SP i.e., IShares SP and VanEck Rare go up and down completely randomly.

Pair Corralation between IShares SP and VanEck Rare

Considering the 90-day investment horizon iShares SP 500 is expected to generate 0.86 times more return on investment than VanEck Rare. However, iShares SP 500 is 1.16 times less risky than VanEck Rare. It trades about -0.08 of its potential returns per unit of risk. VanEck Rare EarthStrategic is currently generating about -0.16 per unit of risk. If you would invest  10,468  in iShares SP 500 on October 12, 2024 and sell it today you would lose (214.00) from holding iShares SP 500 or give up 2.04% of portfolio value over 90 days.

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

iShares SP 500  vs.  VanEck Rare EarthStrategic

iShares SP 500

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares SP is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

VanEck Rare EarthStr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Rare EarthStrategic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with IShares SP and VanEck Rare

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

The idea behind iShares SP 500 and VanEck Rare EarthStrategic 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.