Correlation Between Communication Services and VanEck Video

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

By analyzing existing cross correlation between Communication Services Select and VanEck Video Gaming, you can compare the effects of market volatilities on Communication Services and VanEck Video 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 Communication Services with a short position of VanEck Video. Check out your portfolio center. Please also check ongoing floating volatility patterns of Communication Services and VanEck Video.

Diversification Opportunities for Communication Services and VanEck Video

0.71

Correlation Coefficient

Communication Services  VanEck Video

Poor diversification

The 3 months correlation between Communication and VanEck is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Communication Services Select and VanEck Video Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Video Gaming and Communication Services 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 Communication Services Select are associated (or correlated) with VanEck Video. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Video Gaming has no effect on the direction of Communication Services i.e., Communication Services and VanEck Video go up and down completely randomly.

Pair Corralation between Communication Services and VanEck Video

Considering the 90-day investment horizon Communication Services Select is expected to under-perform the VanEck Video. But the etf apears to be less risky and, when comparing its historical volatility, Communication Services Select is 1.37 times less risky than VanEck Video. The etf trades about -0.01 of its potential returns per unit of risk. The VanEck Video Gaming is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8,409  in VanEck Video Gaming on December 30, 2024 and sell it today you would earn a total of  365.00  from holding VanEck Video Gaming or generate 4.34% return on investment over 90 days.

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

Communication Services Select  vs.  VanEck Video Gaming

Communication Services

Risk-Adjusted Performance

Very Weak

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

VanEck Video Gaming

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Video Gaming are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, VanEck Video is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Communication Services and VanEck Video

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

The idea behind Communication Services Select and VanEck Video Gaming 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.