Correlation Between IShares II and VanEck AEX
Can any of the company-specific risk be diversified away by investing in both IShares II and VanEck AEX 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 IShares II and VanEck AEX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares II Public and VanEck AEX UCITS, you can compare the effects of market volatilities on IShares II and VanEck AEX 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 IShares II with a short position of VanEck AEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares II and VanEck AEX.
Diversification Opportunities for IShares II and VanEck AEX
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and VanEck is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares II Public and VanEck AEX UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck AEX UCITS and IShares II 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 iShares II Public are associated (or correlated) with VanEck AEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck AEX UCITS has no effect on the direction of IShares II i.e., IShares II and VanEck AEX go up and down completely randomly.
Pair Corralation between IShares II and VanEck AEX
Assuming the 90 days trading horizon iShares II Public is expected to under-perform the VanEck AEX. In addition to that, IShares II is 1.13 times more volatile than VanEck AEX UCITS. It trades about -0.04 of its total potential returns per unit of risk. VanEck AEX UCITS is currently generating about -0.02 per unit of volatility. If you would invest 9,028 in VanEck AEX UCITS on August 30, 2024 and sell it today you would lose (225.00) from holding VanEck AEX UCITS or give up 2.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares II Public vs. VanEck AEX UCITS
Performance |
| Timeline |
| iShares II Public |
| VanEck AEX UCITS |
IShares II and VanEck AEX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares II and VanEck AEX
The main advantage of trading using opposite IShares II and VanEck AEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares II position performs unexpectedly, VanEck AEX 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 AEX will offset losses from the drop in VanEck AEX's long position.The idea behind iShares II Public and VanEck AEX UCITS 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.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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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