Correlation Between VanEck IBoxx and VanEck Semiconductor

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

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

Diversification Opportunities for VanEck IBoxx and VanEck Semiconductor

0.78

Correlation Coefficient

VanEck IBoxx  VanEck Semiconductor

Poor diversification

The 3 months correlation between VanEck and VanEck is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding VanEck iBoxx EUR and VanEck Semiconductor UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Semiconductor and VanEck IBoxx 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 iBoxx EUR are associated (or correlated) with VanEck Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Semiconductor has no effect on the direction of VanEck IBoxx i.e., VanEck IBoxx and VanEck Semiconductor go up and down completely randomly.

Pair Corralation between VanEck IBoxx and VanEck Semiconductor

Assuming the 90 days trading horizon VanEck iBoxx EUR is expected to generate 0.35 times more return on investment than VanEck Semiconductor. However, VanEck iBoxx EUR is 2.82 times less risky than VanEck Semiconductor. It trades about -0.09 of its potential returns per unit of risk. VanEck Semiconductor UCITS is currently generating about -0.09 per unit of risk. If you would invest  1,234  in VanEck iBoxx EUR on December 30, 2024 and sell it today you would lose (61.00) from holding VanEck iBoxx EUR or give up 4.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

VanEck iBoxx EUR  vs.  VanEck Semiconductor UCITS

VanEck iBoxx EUR

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck iBoxx EUR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, VanEck IBoxx is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

VanEck Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Semiconductor UCITS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Etf's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the fund sophisticated investors.

Pair Trading with VanEck IBoxx and VanEck Semiconductor

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

The idea behind VanEck iBoxx EUR and VanEck Semiconductor UCITS 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.