Correlation Between VanEck Long and IShares National

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

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

Diversification Opportunities for VanEck Long and IShares National

0.89

Correlation Coefficient

VanEck Long  IShares National

Very poor diversification

The 3 months correlation between VanEck and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Long Muni and iShares National Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares National Muni and VanEck Long 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 Long Muni are associated (or correlated) with IShares National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares National Muni has no effect on the direction of VanEck Long i.e., VanEck Long and IShares National go up and down completely randomly.

Pair Corralation between VanEck Long and IShares National

Considering the 90-day investment horizon VanEck Long Muni is expected to under-perform the IShares National. In addition to that, VanEck Long is 1.53 times more volatile than iShares National Muni. It trades about -0.09 of its total potential returns per unit of risk. iShares National Muni is currently generating about -0.05 per unit of volatility. If you would invest  10,603  in iShares National Muni on December 28, 2024 and sell it today you would lose (84.00) from holding iShares National Muni or give up 0.79% of portfolio value over 90 days.

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

VanEck Long Muni  vs.  iShares National Muni

VanEck Long Muni

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Long Muni has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, VanEck Long is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares National Muni

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares National Muni has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VanEck Long and IShares National

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

The idea behind VanEck Long Muni and iShares National Muni 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.