Correlation Between VCRM and VanEck Vectors

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

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

Diversification Opportunities for VCRM and VanEck Vectors

0.62

Correlation Coefficient

VCRM  VanEck Vectors

Poor diversification

The 3 months correlation between VCRM and VanEck is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding VCRM and VanEck Vectors Moodys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vectors Moodys and VCRM 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 VCRM are associated (or correlated) with VanEck Vectors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Vectors Moodys has no effect on the direction of VCRM i.e., VCRM and VanEck Vectors go up and down completely randomly.

Pair Corralation between VCRM and VanEck Vectors

Given the investment horizon of 90 days VCRM is expected to under-perform the VanEck Vectors. But the etf apears to be less risky and, when comparing its historical volatility, VCRM is 1.32 times less risky than VanEck Vectors. The etf trades about -0.11 of its potential returns per unit of risk. The VanEck Vectors Moodys is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,121  in VanEck Vectors Moodys on October 7, 2024 and sell it today you would lose (5.00) from holding VanEck Vectors Moodys or give up 0.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	73.17%
Values	Daily Returns

VCRM  vs.  VanEck Vectors Moodys

VCRM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VCRM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, VCRM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

VanEck Vectors Moodys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Vectors Moodys has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, VanEck Vectors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VCRM and VanEck Vectors

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

The idea behind VCRM and VanEck Vectors Moodys 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..