Correlation Between VanEck Semiconductor and Esoterica NextG

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

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

Diversification Opportunities for VanEck Semiconductor and Esoterica NextG

0.86

Correlation Coefficient

VanEck Semiconductor  Esoterica NextG

Very poor diversification

The 3 months correlation between VanEck and Esoterica is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Semiconductor ETF and Esoterica NextG Economy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esoterica NextG Economy and VanEck Semiconductor 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 Semiconductor ETF are associated (or correlated) with Esoterica NextG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esoterica NextG Economy has no effect on the direction of VanEck Semiconductor i.e., VanEck Semiconductor and Esoterica NextG go up and down completely randomly.

Pair Corralation between VanEck Semiconductor and Esoterica NextG

Considering the 90-day investment horizon VanEck Semiconductor ETF is expected to under-perform the Esoterica NextG. In addition to that, VanEck Semiconductor is 1.29 times more volatile than Esoterica NextG Economy. It trades about -0.07 of its total potential returns per unit of risk. Esoterica NextG Economy is currently generating about -0.05 per unit of volatility. If you would invest  7,328  in Esoterica NextG Economy on December 28, 2024 and sell it today you would lose (513.00) from holding Esoterica NextG Economy or give up 7.0% of portfolio value over 90 days.

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

VanEck Semiconductor ETF  vs.  Esoterica NextG Economy

VanEck Semiconductor ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Semiconductor ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's primary indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Esoterica NextG Economy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Esoterica NextG Economy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Etf's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with VanEck Semiconductor and Esoterica NextG

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

The idea behind VanEck Semiconductor ETF and Esoterica NextG Economy 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.