Correlation Between VanEck Agribusiness and IShares Global

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

Diversification Opportunities for VanEck Agribusiness and IShares Global

0.87

Correlation Coefficient

VanEck Agribusiness  IShares Global

Very poor diversification

The 3 months correlation between VanEck and IShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Agribusiness ETF and iShares Global Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Materials 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 IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Materials has no effect on the direction of VanEck Agribusiness i.e., VanEck Agribusiness and IShares Global go up and down completely randomly.

Pair Corralation between VanEck Agribusiness and IShares Global

Considering the 90-day investment horizon VanEck Agribusiness ETF is expected to generate 1.02 times more return on investment than IShares Global. However, VanEck Agribusiness is 1.02 times more volatile than iShares Global Materials. It trades about -0.02 of its potential returns per unit of risk. iShares Global Materials is currently generating about -0.04 per unit of risk. If you would invest  6,969  in VanEck Agribusiness ETF on November 28, 2024 and sell it today you would lose (71.00) from holding VanEck Agribusiness ETF or give up 1.02% of portfolio value over 90 days.

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

VanEck Agribusiness ETF  vs.  iShares Global Materials

VanEck Agribusiness ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Agribusiness ETF has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

iShares Global Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Global Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IShares Global is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with VanEck Agribusiness and IShares Global

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

The idea behind VanEck Agribusiness ETF and iShares Global Materials 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 Stocks Directory module to find actively traded stocks across global markets.