Correlation Between VanEck Preferred and AAM Low

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

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

Diversification Opportunities for VanEck Preferred and AAM Low

0.17

Correlation Coefficient

VanEck Preferred  AAM Low

Average diversification

The 3 months correlation between VanEck and AAM is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Preferred Securities and AAM Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAM Low Duration and VanEck 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 VanEck Preferred Securities are associated (or correlated) with AAM Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAM Low Duration has no effect on the direction of VanEck Preferred i.e., VanEck Preferred and AAM Low go up and down completely randomly.

Pair Corralation between VanEck Preferred and AAM Low

Given the investment horizon of 90 days VanEck Preferred Securities is expected to under-perform the AAM Low. In addition to that, VanEck Preferred is 1.5 times more volatile than AAM Low Duration. It trades about -0.02 of its total potential returns per unit of risk. AAM Low Duration is currently generating about 0.05 per unit of volatility. If you would invest  2,029  in AAM Low Duration on December 28, 2024 and sell it today you would earn a total of  21.00  from holding AAM Low Duration or generate 1.03% return on investment over 90 days.

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

VanEck Preferred Securities  vs.  AAM Low Duration

VanEck Preferred Sec

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Preferred Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VanEck Preferred is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AAM Low Duration

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AAM Low Duration are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, AAM Low is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with VanEck Preferred and AAM Low

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

The idea behind VanEck Preferred Securities and AAM Low Duration 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.