Correlation Between Vanguard Mid and Van Eck

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

By analyzing existing cross correlation between Vanguard Mid Cap Index and Van Eck, you can compare the effects of market volatilities on Vanguard Mid and Van Eck 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 Mid with a short position of Van Eck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid and Van Eck.

Diversification Opportunities for Vanguard Mid and Van Eck

0.8

Correlation Coefficient

Vanguard Mid  Van Eck

Very poor diversification

The 3 months correlation between Vanguard and Van is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Van Eck in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Van Eck and Vanguard Mid 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 Mid Cap Index are associated (or correlated) with Van Eck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Van Eck has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and Van Eck go up and down completely randomly.

Pair Corralation between Vanguard Mid and Van Eck

Allowing for the 90-day total investment horizon Vanguard Mid Cap Index is expected to generate 3.26 times more return on investment than Van Eck. However, Vanguard Mid is 3.26 times more volatile than Van Eck. It trades about 0.28 of its potential returns per unit of risk. Van Eck is currently generating about 0.26 per unit of risk. If you would invest  25,153  in Vanguard Mid Cap Index on September 4, 2024 and sell it today you would earn a total of  3,206  from holding Vanguard Mid Cap Index or generate 12.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	46.03%
Values	Daily Returns

Vanguard Mid Cap Index  vs.  Van Eck

Vanguard Mid Cap

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Vanguard Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Van Eck

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Van Eck has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Van Eck is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard Mid and Van Eck

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

The idea behind Vanguard Mid Cap Index and Van Eck 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.