Correlation Between Xtrackers and VanEck Vectors

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

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

Diversification Opportunities for Xtrackers and VanEck Vectors

0.2

Correlation Coefficient

Xtrackers  VanEck Vectors

Modest diversification

The 3 months correlation between Xtrackers and VanEck is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers II and VanEck Vectors Morningstar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vectors Morni and Xtrackers 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 Xtrackers II 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 Morni has no effect on the direction of Xtrackers i.e., Xtrackers and VanEck Vectors go up and down completely randomly.

Pair Corralation between Xtrackers and VanEck Vectors

Assuming the 90 days trading horizon Xtrackers II is expected to generate 0.37 times more return on investment than VanEck Vectors. However, Xtrackers II is 2.74 times less risky than VanEck Vectors. It trades about 0.06 of its potential returns per unit of risk. VanEck Vectors Morningstar is currently generating about -0.05 per unit of risk. If you would invest  710.00  in Xtrackers II on September 29, 2024 and sell it today you would earn a total of  44.00  from holding Xtrackers II or generate 6.2% return on investment over 90 days.

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

Xtrackers II   vs.  VanEck Vectors Morningstar

Xtrackers II

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers II has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Xtrackers is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

VanEck Vectors Morni

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Vectors Morningstar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, VanEck Vectors is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Xtrackers and VanEck Vectors

The main advantage of trading using opposite Xtrackers and VanEck Vectors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers 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 Xtrackers II and VanEck Vectors Morningstar 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.