Correlation Between VanEck Fallen and IShares BB
Can any of the company-specific risk be diversified away by investing in both VanEck Fallen and IShares BB 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 Fallen and IShares BB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VanEck Fallen Angel and iShares BB Rated, you can compare the effects of market volatilities on VanEck Fallen and IShares BB 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 Fallen with a short position of IShares BB. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Fallen and IShares BB.
Diversification Opportunities for VanEck Fallen and IShares BB
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between VanEck and IShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Fallen Angel and iShares BB Rated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares BB Rated and VanEck Fallen 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 Fallen Angel are associated (or correlated) with IShares BB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares BB Rated has no effect on the direction of VanEck Fallen i.e., VanEck Fallen and IShares BB go up and down completely randomly.
Pair Corralation between VanEck Fallen and IShares BB
Given the investment horizon of 90 days VanEck Fallen is expected to generate 1.05 times less return on investment than IShares BB. But when comparing it to its historical volatility, VanEck Fallen Angel is 1.11 times less risky than IShares BB. It trades about 0.19 of its potential returns per unit of risk. iShares BB Rated is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 4,597 in iShares BB Rated on October 25, 2024 and sell it today you would earn a total of 48.96 from holding iShares BB Rated or generate 1.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
VanEck Fallen Angel vs. iShares BB Rated
Performance |
| Timeline |
| VanEck Fallen Angel |
| iShares BB Rated |
VanEck Fallen and IShares BB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VanEck Fallen and IShares BB
The main advantage of trading using opposite VanEck Fallen and IShares BB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Fallen position performs unexpectedly, IShares BB 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 IShares BB will offset losses from the drop in IShares BB's long position.| VanEck Fallen vs. iShares Fallen Angels | VanEck Fallen vs. VanEck Emerging Markets | VanEck Fallen vs. First Trust Multi Asset | VanEck Fallen vs. iShares 0 5 Year |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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