Correlation Between VanEck Oil and IShares Basic
Can any of the company-specific risk be diversified away by investing in both VanEck Oil and IShares Basic 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 Oil and IShares Basic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VanEck Oil Refiners and iShares Basic Materials, you can compare the effects of market volatilities on VanEck Oil and IShares Basic 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 Oil with a short position of IShares Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Oil and IShares Basic.
Diversification Opportunities for VanEck Oil and IShares Basic
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between VanEck and IShares is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Oil Refiners and iShares Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Basic Materials and VanEck Oil 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 Oil Refiners are associated (or correlated) with IShares Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Basic Materials has no effect on the direction of VanEck Oil i.e., VanEck Oil and IShares Basic go up and down completely randomly.
Pair Corralation between VanEck Oil and IShares Basic
Given the investment horizon of 90 days VanEck Oil Refiners is expected to generate 0.94 times more return on investment than IShares Basic. However, VanEck Oil Refiners is 1.06 times less risky than IShares Basic. It trades about 0.05 of its potential returns per unit of risk. iShares Basic Materials is currently generating about -0.01 per unit of risk. If you would invest 3,130 in VanEck Oil Refiners on September 5, 2024 and sell it today you would earn a total of 25.00 from holding VanEck Oil Refiners or generate 0.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
VanEck Oil Refiners vs. iShares Basic Materials
Performance |
| Timeline |
| VanEck Oil Refiners |
| iShares Basic Materials |
VanEck Oil and IShares Basic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VanEck Oil and IShares Basic
The main advantage of trading using opposite VanEck Oil and IShares Basic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Oil position performs unexpectedly, IShares Basic 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 Basic will offset losses from the drop in IShares Basic's long position.| VanEck Oil vs. iShares Basic Materials | VanEck Oil vs. iShares Utilities ETF | VanEck Oil vs. iShares Financials ETF | VanEck Oil vs. iShares Healthcare ETF |
| IShares Basic vs. iShares Industrials ETF | IShares Basic vs. iShares Consumer Discretionary | IShares Basic vs. iShares Consumer Staples | IShares Basic vs. iShares Telecommunications ETF |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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