Correlation Between VanEck Retail and Vanguard Health
Can any of the company-specific risk be diversified away by investing in both VanEck Retail and Vanguard Health 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 Retail and Vanguard Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VanEck Retail ETF and Vanguard Health Care, you can compare the effects of market volatilities on VanEck Retail and Vanguard Health 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 Retail with a short position of Vanguard Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Retail and Vanguard Health.
Diversification Opportunities for VanEck Retail and Vanguard Health
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VanEck and Vanguard is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Retail ETF and Vanguard Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Health Care and VanEck Retail 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 Retail ETF are associated (or correlated) with Vanguard Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Health Care has no effect on the direction of VanEck Retail i.e., VanEck Retail and Vanguard Health go up and down completely randomly.
Pair Corralation between VanEck Retail and Vanguard Health
Considering the 90-day investment horizon VanEck Retail is expected to generate 133.89 times less return on investment than Vanguard Health. But when comparing it to its historical volatility, VanEck Retail ETF is 1.15 times less risky than Vanguard Health. It trades about 0.0 of its potential returns per unit of risk. Vanguard Health Care is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 25,916 in Vanguard Health Care on March 7, 2024 and sell it today you would earn a total of 683.40 from holding Vanguard Health Care or generate 2.64% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.45% |
Values | Daily Returns |
VanEck Retail ETF vs. Vanguard Health Care
Performance |
Timeline |
VanEck Retail ETF |
Vanguard Health Care |
VanEck Retail and Vanguard Health Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with VanEck Retail and Vanguard Health
The main advantage of trading using opposite VanEck Retail and Vanguard Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Retail position performs unexpectedly, Vanguard Health 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 Health will offset losses from the drop in Vanguard Health's long position.VanEck Retail vs. Invesco SP SmallCap | VanEck Retail vs. Invesco SP SmallCap | VanEck Retail vs. Invesco SP SmallCap | VanEck Retail vs. Invesco SP SmallCap |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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