Correlation Between Veeco Instruments and ProShares Nanotechnology

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

By analyzing existing cross correlation between Veeco Instruments and ProShares Nanotechnology ETF, you can compare the effects of market volatilities on Veeco Instruments and ProShares Nanotechnology 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 Veeco Instruments with a short position of ProShares Nanotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veeco Instruments and ProShares Nanotechnology.

Diversification Opportunities for Veeco Instruments and ProShares Nanotechnology

0.86

Correlation Coefficient

Veeco Instruments  ProShares Nanotechnology

Very poor diversification

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

Pair Corralation between Veeco Instruments and ProShares Nanotechnology

Given the investment horizon of 90 days Veeco Instruments is expected to under-perform the ProShares Nanotechnology. In addition to that, Veeco Instruments is 1.44 times more volatile than ProShares Nanotechnology ETF. It trades about -0.04 of its total potential returns per unit of risk. ProShares Nanotechnology ETF is currently generating about 0.03 per unit of volatility. If you would invest  4,675  in ProShares Nanotechnology ETF on October 23, 2024 and sell it today you would earn a total of  90.00  from holding ProShares Nanotechnology ETF or generate 1.93% return on investment over 90 days.

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

Veeco Instruments  vs.  ProShares Nanotechnology ETF

Veeco Instruments

Risk-Adjusted Performance

0 of 100

Very Weak

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

ProShares Nanotechnology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Nanotechnology ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, ProShares Nanotechnology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Veeco Instruments and ProShares Nanotechnology

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

The idea behind Veeco Instruments and ProShares Nanotechnology ETF 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.