Correlation Between MFUT and VanEck Inflation

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

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

Diversification Opportunities for MFUT and VanEck Inflation

-0.25

Correlation Coefficient

MFUT  VanEck Inflation

Very good diversification

The 3 months correlation between MFUT and VanEck is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding MFUT and VanEck Inflation Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Inflation All and MFUT 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 MFUT are associated (or correlated) with VanEck Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Inflation All has no effect on the direction of MFUT i.e., MFUT and VanEck Inflation go up and down completely randomly.

Pair Corralation between MFUT and VanEck Inflation

Given the investment horizon of 90 days MFUT is expected to under-perform the VanEck Inflation. But the etf apears to be less risky and, when comparing its historical volatility, MFUT is 1.13 times less risky than VanEck Inflation. The etf trades about -0.14 of its potential returns per unit of risk. The VanEck Inflation Allocation is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,794  in VanEck Inflation Allocation on December 28, 2024 and sell it today you would earn a total of  225.00  from holding VanEck Inflation Allocation or generate 8.05% return on investment over 90 days.

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

MFUT  vs.  VanEck Inflation Allocation

MFUT

Risk-Adjusted Performance

Very Weak

Over the last 90 days MFUT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, MFUT is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

VanEck Inflation All

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Inflation Allocation are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, VanEck Inflation may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with MFUT and VanEck Inflation

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

The idea behind MFUT and VanEck Inflation Allocation 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.