Correlation Between VanEck Long and Xtrackers Municipal

Can any of the company-specific risk be diversified away by investing in both VanEck Long and Xtrackers Municipal 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 Xtrackers Municipal 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 Xtrackers Municipal Infrastructure, you can compare the effects of market volatilities on VanEck Long and Xtrackers Municipal 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 Xtrackers Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Long and Xtrackers Municipal.

Diversification Opportunities for VanEck Long and Xtrackers Municipal

0.74

Correlation Coefficient

VanEck Long  Xtrackers Municipal

Poor diversification

The 3 months correlation between VanEck and Xtrackers is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Long Muni and Xtrackers Municipal Infrastruc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Municipal 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 Xtrackers Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Municipal has no effect on the direction of VanEck Long i.e., VanEck Long and Xtrackers Municipal go up and down completely randomly.

Pair Corralation between VanEck Long and Xtrackers Municipal

Considering the 90-day investment horizon VanEck Long Muni is expected to under-perform the Xtrackers Municipal. But the etf apears to be less risky and, when comparing its historical volatility, VanEck Long Muni is 1.1 times less risky than Xtrackers Municipal. The etf trades about -0.09 of its potential returns per unit of risk. The Xtrackers Municipal Infrastructure is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  2,508  in Xtrackers Municipal Infrastructure on December 29, 2024 and sell it today you would lose (48.00) from holding Xtrackers Municipal Infrastructure or give up 1.91% of portfolio value over 90 days.

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

VanEck Long Muni  vs.  Xtrackers Municipal Infrastruc

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.

Xtrackers Municipal

Risk-Adjusted Performance

Very Weak

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

Pair Trading with VanEck Long and Xtrackers Municipal

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

The idea behind VanEck Long Muni and Xtrackers Municipal Infrastructure 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 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.