Correlation Between Vanguard and VanEck Rare

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

By analyzing existing cross correlation between Vanguard SP 500 and VanEck Rare EarthStrategic, you can compare the effects of market volatilities on Vanguard and VanEck Rare 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 with a short position of VanEck Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and VanEck Rare.

Diversification Opportunities for Vanguard and VanEck Rare

-0.47

Correlation Coefficient

Vanguard  VanEck Rare

Very good diversification

The 3 months correlation between Vanguard and VanEck is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and VanEck Rare EarthStrategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Rare EarthStr and Vanguard 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 SP 500 are associated (or correlated) with VanEck Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Rare EarthStr has no effect on the direction of Vanguard i.e., Vanguard and VanEck Rare go up and down completely randomly.

Pair Corralation between Vanguard and VanEck Rare

Considering the 90-day investment horizon Vanguard SP 500 is expected to generate 0.69 times more return on investment than VanEck Rare. However, Vanguard SP 500 is 1.46 times less risky than VanEck Rare. It trades about -0.13 of its potential returns per unit of risk. VanEck Rare EarthStrategic is currently generating about -0.16 per unit of risk. If you would invest  55,675  in Vanguard SP 500 on October 12, 2024 and sell it today you would lose (1,461) from holding Vanguard SP 500 or give up 2.62% of portfolio value over 90 days.

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

Vanguard SP 500  vs.  VanEck Rare EarthStrategic

Vanguard SP 500

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

VanEck Rare EarthStr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Rare EarthStrategic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Vanguard and VanEck Rare

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

The idea behind Vanguard SP 500 and VanEck Rare EarthStrategic 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.

Check out your portfolio center.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.