Correlation Between VanEck LongFlat and HCM Defender

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

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

Diversification Opportunities for VanEck LongFlat and HCM Defender

0.97

Correlation Coefficient

VanEck LongFlat  HCM Defender

Almost no diversification

The 3 months correlation between VanEck and HCM is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding VanEck LongFlat Trend and HCM Defender 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCM Defender 500 and VanEck LongFlat 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 VanEck LongFlat Trend are associated (or correlated) with HCM Defender. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCM Defender 500 has no effect on the direction of VanEck LongFlat i.e., VanEck LongFlat and HCM Defender go up and down completely randomly.

Pair Corralation between VanEck LongFlat and HCM Defender

Given the investment horizon of 90 days VanEck LongFlat Trend is expected to generate 0.88 times more return on investment than HCM Defender. However, VanEck LongFlat Trend is 1.13 times less risky than HCM Defender. It trades about -0.07 of its potential returns per unit of risk. HCM Defender 500 is currently generating about -0.1 per unit of risk. If you would invest  5,023  in VanEck LongFlat Trend on December 27, 2024 and sell it today you would lose (221.00) from holding VanEck LongFlat Trend or give up 4.4% of portfolio value over 90 days.

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

VanEck LongFlat Trend  vs.  HCM Defender 500

VanEck LongFlat Trend

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck LongFlat Trend has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, VanEck LongFlat is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

HCM Defender 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days HCM Defender 500 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Etf's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with VanEck LongFlat and HCM Defender

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

The idea behind VanEck LongFlat Trend and HCM Defender 500 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.