Correlation Between IShares Preferred and VanEck Mortgage

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

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

Diversification Opportunities for IShares Preferred and VanEck Mortgage

0.33

Correlation Coefficient

IShares Preferred  VanEck Mortgage

Weak diversification

The 3 months correlation between IShares and VanEck is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding iShares Preferred and and VanEck Mortgage REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Mortgage REIT and IShares Preferred 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 iShares Preferred and are associated (or correlated) with VanEck Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Mortgage REIT has no effect on the direction of IShares Preferred i.e., IShares Preferred and VanEck Mortgage go up and down completely randomly.

Pair Corralation between IShares Preferred and VanEck Mortgage

Considering the 90-day investment horizon IShares Preferred is expected to generate 12.95 times less return on investment than VanEck Mortgage. But when comparing it to its historical volatility, iShares Preferred and is 1.94 times less risky than VanEck Mortgage. It trades about 0.01 of its potential returns per unit of risk. VanEck Mortgage REIT is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,055  in VanEck Mortgage REIT on December 27, 2024 and sell it today you would earn a total of  68.00  from holding VanEck Mortgage REIT or generate 6.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

iShares Preferred and  vs.  VanEck Mortgage REIT

iShares Preferred

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Preferred and are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, IShares Preferred is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

VanEck Mortgage REIT

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Mortgage REIT are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, VanEck Mortgage may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares Preferred and VanEck Mortgage

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

The idea behind iShares Preferred and and VanEck Mortgage REIT 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.