Correlation Between VanEck Semiconductor and Autoliv

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

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

Diversification Opportunities for VanEck Semiconductor and Autoliv

0.64

Correlation Coefficient

VanEck Semiconductor  Autoliv

Poor diversification

The 3 months correlation between VanEck and Autoliv is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Semiconductor ETF and Autoliv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autoliv and VanEck Semiconductor 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 Semiconductor ETF are associated (or correlated) with Autoliv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autoliv has no effect on the direction of VanEck Semiconductor i.e., VanEck Semiconductor and Autoliv go up and down completely randomly.

Pair Corralation between VanEck Semiconductor and Autoliv

Considering the 90-day investment horizon VanEck Semiconductor ETF is expected to generate 1.04 times more return on investment than Autoliv. However, VanEck Semiconductor is 1.04 times more volatile than Autoliv. It trades about 0.38 of its potential returns per unit of risk. Autoliv is currently generating about -0.09 per unit of risk. If you would invest  22,140  in VanEck Semiconductor ETF on March 9, 2024 and sell it today you would earn a total of  3,101  from holding VanEck Semiconductor ETF or generate 14.01% return on investment over 90 days.

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

VanEck Semiconductor ETF  vs.  Autoliv

VanEck Semiconductor ETF

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Semiconductor ETF are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak primary indicators, VanEck Semiconductor demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Autoliv

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Autoliv are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable essential indicators, Autoliv is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with VanEck Semiconductor and Autoliv

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

The idea behind VanEck Semiconductor ETF and Autoliv 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.