Correlation Between Vanguard ESG and VanEck Emerging

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

By analyzing existing cross correlation between Vanguard ESG Corporate and VanEck Emerging Markets, you can compare the effects of market volatilities on Vanguard ESG and VanEck Emerging 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 Vanguard ESG with a short position of VanEck Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard ESG and VanEck Emerging.

Diversification Opportunities for Vanguard ESG and VanEck Emerging

-0.11

Correlation Coefficient

Vanguard ESG  VanEck Emerging

Good diversification

The 3 months correlation between Vanguard and VanEck is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard ESG Corporate and VanEck Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Emerging Markets and Vanguard ESG 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 Vanguard ESG Corporate are associated (or correlated) with VanEck Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Emerging Markets has no effect on the direction of Vanguard ESG i.e., Vanguard ESG and VanEck Emerging go up and down completely randomly.

Pair Corralation between Vanguard ESG and VanEck Emerging

Given the investment horizon of 90 days Vanguard ESG Corporate is expected to generate 0.89 times more return on investment than VanEck Emerging. However, Vanguard ESG Corporate is 1.12 times less risky than VanEck Emerging. It trades about 0.11 of its potential returns per unit of risk. VanEck Emerging Markets is currently generating about 0.07 per unit of risk. If you would invest  6,239  in Vanguard ESG Corporate on September 15, 2024 and sell it today you would earn a total of  45.00  from holding Vanguard ESG Corporate or generate 0.72% return on investment over 90 days.

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

Vanguard ESG Corporate  vs.  VanEck Emerging Markets

Vanguard ESG Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard ESG Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Vanguard ESG is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

VanEck Emerging Markets

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Emerging Markets are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, VanEck Emerging is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard ESG and VanEck Emerging

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

The idea behind Vanguard ESG Corporate and VanEck Emerging Markets 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.