Correlation Between VanEck Vectors and VanEck MSCI

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

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

Diversification Opportunities for VanEck Vectors and VanEck MSCI

0.88

Correlation Coefficient

VanEck Vectors  VanEck MSCI

Very poor diversification

The 3 months correlation between VanEck and VanEck is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Vectors Small and VanEck MSCI Australian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck MSCI Australian and VanEck Vectors 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 Vectors Small are associated (or correlated) with VanEck MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck MSCI Australian has no effect on the direction of VanEck Vectors i.e., VanEck Vectors and VanEck MSCI go up and down completely randomly.

Pair Corralation between VanEck Vectors and VanEck MSCI

Assuming the 90 days trading horizon VanEck Vectors Small is expected to generate 1.31 times more return on investment than VanEck MSCI. However, VanEck Vectors is 1.31 times more volatile than VanEck MSCI Australian. It trades about -0.02 of its potential returns per unit of risk. VanEck MSCI Australian is currently generating about -0.04 per unit of risk. If you would invest  1,963  in VanEck Vectors Small on December 1, 2024 and sell it today you would lose (23.00) from holding VanEck Vectors Small or give up 1.17% of portfolio value over 90 days.

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

VanEck Vectors Small  vs.  VanEck MSCI Australian

VanEck Vectors Small

Risk-Adjusted Performance

Very Weak

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

VanEck MSCI Australian

Risk-Adjusted Performance

Very Weak

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

Pair Trading with VanEck Vectors and VanEck MSCI

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

The idea behind VanEck Vectors Small and VanEck MSCI Australian 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.