Correlation Between IPath Series and VanEck Digital

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

By analyzing existing cross correlation between iPath Series B and VanEck Digital Transformation, you can compare the effects of market volatilities on IPath Series and VanEck Digital 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 IPath Series with a short position of VanEck Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPath Series and VanEck Digital.

Diversification Opportunities for IPath Series and VanEck Digital

-0.83

Correlation Coefficient

IPath Series  VanEck Digital

Pay attention - limited upside

The 3 months correlation between IPath and VanEck is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding iPath Series B and VanEck Digital Transformation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Digital Trans and IPath Series 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 iPath Series B are associated (or correlated) with VanEck Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Digital Trans has no effect on the direction of IPath Series i.e., IPath Series and VanEck Digital go up and down completely randomly.

Pair Corralation between IPath Series and VanEck Digital

Considering the 90-day investment horizon iPath Series B is expected to under-perform the VanEck Digital. But the etf apears to be less risky and, when comparing its historical volatility, iPath Series B is 1.18 times less risky than VanEck Digital. The etf trades about -0.06 of its potential returns per unit of risk. The VanEck Digital Transformation is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,524  in VanEck Digital Transformation on October 23, 2024 and sell it today you would earn a total of  152.00  from holding VanEck Digital Transformation or generate 9.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

iPath Series B  vs.  VanEck Digital Transformation

iPath Series B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iPath Series B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

VanEck Digital Trans

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Digital Transformation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, VanEck Digital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IPath Series and VanEck Digital

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

The idea behind iPath Series B and VanEck Digital Transformation 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.