Correlation Between Global X and VanEck Preferred

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

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

Diversification Opportunities for Global X and VanEck Preferred

0.95

Correlation Coefficient

Global X  VanEck Preferred

Almost no diversification

The 3 months correlation between Global and VanEck is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Global X SuperIncome and VanEck Preferred Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Preferred Sec and Global X 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 Global X SuperIncome are associated (or correlated) with VanEck Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Preferred Sec has no effect on the direction of Global X i.e., Global X and VanEck Preferred go up and down completely randomly.

Pair Corralation between Global X and VanEck Preferred

Given the investment horizon of 90 days Global X SuperIncome is expected to under-perform the VanEck Preferred. In addition to that, Global X is 1.18 times more volatile than VanEck Preferred Securities. It trades about -0.05 of its total potential returns per unit of risk. VanEck Preferred Securities is currently generating about -0.04 per unit of volatility. If you would invest  1,713  in VanEck Preferred Securities on December 28, 2024 and sell it today you would lose (24.00) from holding VanEck Preferred Securities or give up 1.4% of portfolio value over 90 days.

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

Global X SuperIncome  vs.  VanEck Preferred Securities

Global X SuperIncome

Risk-Adjusted Performance

Very Weak

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

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.

Pair Trading with Global X and VanEck Preferred

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

The idea behind Global X SuperIncome and VanEck Preferred Securities 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.