Correlation Between VanEck Agribusiness and IPath Bloomberg

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

By analyzing existing cross correlation between VanEck Agribusiness ETF and iPath Bloomberg Commodity, you can compare the effects of market volatilities on VanEck Agribusiness and IPath Bloomberg 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 Agribusiness with a short position of IPath Bloomberg. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Agribusiness and IPath Bloomberg.

Diversification Opportunities for VanEck Agribusiness and IPath Bloomberg

0.8

Correlation Coefficient

VanEck Agribusiness  IPath Bloomberg

Very poor diversification

The 3 months correlation between VanEck and IPath is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Agribusiness ETF and iPath Bloomberg Commodity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iPath Bloomberg Commodity and VanEck Agribusiness 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 Agribusiness ETF are associated (or correlated) with IPath Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iPath Bloomberg Commodity has no effect on the direction of VanEck Agribusiness i.e., VanEck Agribusiness and IPath Bloomberg go up and down completely randomly.

Pair Corralation between VanEck Agribusiness and IPath Bloomberg

Considering the 90-day investment horizon VanEck Agribusiness is expected to generate 1.78 times less return on investment than IPath Bloomberg. In addition to that, VanEck Agribusiness is 1.15 times more volatile than iPath Bloomberg Commodity. It trades about 0.1 of its total potential returns per unit of risk. iPath Bloomberg Commodity is currently generating about 0.2 per unit of volatility. If you would invest  3,177  in iPath Bloomberg Commodity on December 27, 2024 and sell it today you would earn a total of  307.00  from holding iPath Bloomberg Commodity or generate 9.66% return on investment over 90 days.

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

VanEck Agribusiness ETF  vs.  iPath Bloomberg Commodity

VanEck Agribusiness ETF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Agribusiness ETF are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, VanEck Agribusiness is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

iPath Bloomberg Commodity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iPath Bloomberg Commodity are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking indicators, IPath Bloomberg may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with VanEck Agribusiness and IPath Bloomberg

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

The idea behind VanEck Agribusiness ETF and iPath Bloomberg Commodity 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.