Correlation Between VanEck Africa and EGPT

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

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

Diversification Opportunities for VanEck Africa and EGPT

0.03

Correlation Coefficient

VanEck Africa  EGPT

Significant diversification

The 3 months correlation between VanEck and EGPT is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Africa Index and EGPT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EGPT and VanEck Africa 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 VanEck Africa Index are associated (or correlated) with EGPT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EGPT has no effect on the direction of VanEck Africa i.e., VanEck Africa and EGPT go up and down completely randomly.

Pair Corralation between VanEck Africa and EGPT

Considering the 90-day investment horizon VanEck Africa is expected to generate 6.47 times less return on investment than EGPT. But when comparing it to its historical volatility, VanEck Africa Index is 2.12 times less risky than EGPT. It trades about 0.02 of its potential returns per unit of risk. EGPT is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,509  in EGPT on February 14, 2024 and sell it today you would earn a total of  639.00  from holding EGPT or generate 42.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	87.93%
Values	Daily Returns

VanEck Africa Index  vs.  EGPT

VanEck Africa Index

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Africa Index are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady technical and fundamental indicators, VanEck Africa disclosed solid returns over the last few months and may actually be approaching a breakup point.

EGPT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with VanEck Africa and EGPT

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

The idea behind VanEck Africa Index and EGPT 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 Stocks Directory module to find actively traded stocks across global markets.