Correlation Between ETRACS Monthly and VanEck LongFlat
Can any of the company-specific risk be diversified away by investing in both ETRACS Monthly and VanEck LongFlat 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 ETRACS Monthly and VanEck LongFlat into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETRACS Monthly Pay and VanEck LongFlat Trend, you can compare the effects of market volatilities on ETRACS Monthly and VanEck LongFlat 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 ETRACS Monthly with a short position of VanEck LongFlat. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS Monthly and VanEck LongFlat.
Diversification Opportunities for ETRACS Monthly and VanEck LongFlat
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ETRACS and VanEck is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS Monthly Pay and VanEck LongFlat Trend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck LongFlat Trend and ETRACS Monthly 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 ETRACS Monthly Pay are associated (or correlated) with VanEck LongFlat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck LongFlat Trend has no effect on the direction of ETRACS Monthly i.e., ETRACS Monthly and VanEck LongFlat go up and down completely randomly.
Pair Corralation between ETRACS Monthly and VanEck LongFlat
Given the investment horizon of 90 days ETRACS Monthly is expected to generate 1.4 times less return on investment than VanEck LongFlat. In addition to that, ETRACS Monthly is 1.47 times more volatile than VanEck LongFlat Trend. It trades about 0.18 of its total potential returns per unit of risk. VanEck LongFlat Trend is currently generating about 0.37 per unit of volatility. If you would invest 4,820 in VanEck LongFlat Trend on September 1, 2024 and sell it today you would earn a total of 293.00 from holding VanEck LongFlat Trend or generate 6.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
ETRACS Monthly Pay vs. VanEck LongFlat Trend
Performance |
| Timeline |
| ETRACS Monthly Pay |
| VanEck LongFlat Trend |
ETRACS Monthly and VanEck LongFlat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETRACS Monthly and VanEck LongFlat
The main advantage of trading using opposite ETRACS Monthly and VanEck LongFlat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS Monthly position performs unexpectedly, VanEck LongFlat 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 VanEck LongFlat will offset losses from the drop in VanEck LongFlat's long position.| ETRACS Monthly vs. ProShares VIX Mid Term | ETRACS Monthly vs. iPath Series B | ETRACS Monthly vs. ProShares Short Russell2000 |
| VanEck LongFlat vs. VanEck Morningstar International | VanEck LongFlat vs. PIMCO RAFI Dynamic | VanEck LongFlat vs. PIMCO RAFI Dynamic | VanEck LongFlat vs. John Hancock Multifactor |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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