Correlation Between VanEck Agribusiness and Sprott Nickel
Can any of the company-specific risk be diversified away by investing in both VanEck Agribusiness and Sprott Nickel 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 Agribusiness and Sprott Nickel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VanEck Agribusiness ETF and Sprott Nickel Miners, you can compare the effects of market volatilities on VanEck Agribusiness and Sprott Nickel 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 Agribusiness with a short position of Sprott Nickel. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Agribusiness and Sprott Nickel.
Diversification Opportunities for VanEck Agribusiness and Sprott Nickel
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VanEck and Sprott is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Agribusiness ETF and Sprott Nickel Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Nickel Miners and VanEck Agribusiness 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 Agribusiness ETF are associated (or correlated) with Sprott Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Nickel Miners has no effect on the direction of VanEck Agribusiness i.e., VanEck Agribusiness and Sprott Nickel go up and down completely randomly.
Pair Corralation between VanEck Agribusiness and Sprott Nickel
Considering the 90-day investment horizon VanEck Agribusiness ETF is expected to generate 0.57 times more return on investment than Sprott Nickel. However, VanEck Agribusiness ETF is 1.74 times less risky than Sprott Nickel. It trades about -0.09 of its potential returns per unit of risk. Sprott Nickel Miners is currently generating about -0.25 per unit of risk. If you would invest 7,270 in VanEck Agribusiness ETF on August 27, 2024 and sell it today you would lose (118.00) from holding VanEck Agribusiness ETF or give up 1.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
VanEck Agribusiness ETF vs. Sprott Nickel Miners
Performance |
| Timeline |
| VanEck Agribusiness ETF |
| Sprott Nickel Miners |
VanEck Agribusiness and Sprott Nickel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VanEck Agribusiness and Sprott Nickel
The main advantage of trading using opposite VanEck Agribusiness and Sprott Nickel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Agribusiness position performs unexpectedly, Sprott Nickel 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 Sprott Nickel will offset losses from the drop in Sprott Nickel's long position.The idea behind VanEck Agribusiness ETF and Sprott Nickel Miners 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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