Correlation Between ZKB Palladium and Vanguard FTSE

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

By analyzing existing cross correlation between ZKB Palladium ETF and Vanguard FTSE Japan, you can compare the effects of market volatilities on ZKB Palladium and Vanguard FTSE 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 ZKB Palladium with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZKB Palladium and Vanguard FTSE.

Diversification Opportunities for ZKB Palladium and Vanguard FTSE

0.16

Correlation Coefficient

ZKB Palladium  Vanguard FTSE

Average diversification

The 3 months correlation between ZKB and Vanguard is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding ZKB Palladium ETF and Vanguard FTSE Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Japan and ZKB Palladium 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 ZKB Palladium ETF are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Japan has no effect on the direction of ZKB Palladium i.e., ZKB Palladium and Vanguard FTSE go up and down completely randomly.

Pair Corralation between ZKB Palladium and Vanguard FTSE

Assuming the 90 days trading horizon ZKB Palladium is expected to generate 11.5 times less return on investment than Vanguard FTSE. In addition to that, ZKB Palladium is 1.49 times more volatile than Vanguard FTSE Japan. It trades about 0.01 of its total potential returns per unit of risk. Vanguard FTSE Japan is currently generating about 0.11 per unit of volatility. If you would invest  3,138  in Vanguard FTSE Japan on December 22, 2024 and sell it today you would earn a total of  201.00  from holding Vanguard FTSE Japan or generate 6.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

ZKB Palladium ETF  vs.  Vanguard FTSE Japan

ZKB Palladium ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days ZKB Palladium ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ZKB Palladium is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Vanguard FTSE Japan

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Japan are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ZKB Palladium and Vanguard FTSE

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

The idea behind ZKB Palladium ETF and Vanguard FTSE Japan 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.