Correlation Between VanEck ETF and Vanguard Momentum
Can any of the company-specific risk be diversified away by investing in both VanEck ETF and Vanguard Momentum 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 ETF and Vanguard Momentum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VanEck ETF Trust and Vanguard Momentum Factor, you can compare the effects of market volatilities on VanEck ETF and Vanguard Momentum 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 ETF with a short position of Vanguard Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck ETF and Vanguard Momentum.
Diversification Opportunities for VanEck ETF and Vanguard Momentum
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between VanEck and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding VanEck ETF Trust and Vanguard Momentum Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Momentum Factor and VanEck ETF 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 ETF Trust are associated (or correlated) with Vanguard Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Momentum Factor has no effect on the direction of VanEck ETF i.e., VanEck ETF and Vanguard Momentum go up and down completely randomly.
Pair Corralation between VanEck ETF and Vanguard Momentum
Given the investment horizon of 90 days VanEck ETF Trust is expected to generate 0.86 times more return on investment than Vanguard Momentum. However, VanEck ETF Trust is 1.17 times less risky than Vanguard Momentum. It trades about 0.04 of its potential returns per unit of risk. Vanguard Momentum Factor is currently generating about -0.06 per unit of risk. If you would invest 3,643 in VanEck ETF Trust on September 13, 2024 and sell it today you would earn a total of 21.00 from holding VanEck ETF Trust or generate 0.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
VanEck ETF Trust vs. Vanguard Momentum Factor
Performance |
| Timeline |
| VanEck ETF Trust |
| Vanguard Momentum Factor |
VanEck ETF and Vanguard Momentum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VanEck ETF and Vanguard Momentum
The main advantage of trading using opposite VanEck ETF and Vanguard Momentum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck ETF position performs unexpectedly, Vanguard Momentum 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 Vanguard Momentum will offset losses from the drop in Vanguard Momentum's long position.| VanEck ETF vs. Vanguard Momentum Factor | VanEck ETF vs. Vanguard Multifactor | VanEck ETF vs. Vanguard Value Factor | VanEck ETF vs. Vanguard Minimum Volatility |
| Vanguard Momentum vs. Vanguard Multifactor | Vanguard Momentum vs. Vanguard Value Factor | Vanguard Momentum vs. Vanguard Minimum Volatility | Vanguard Momentum vs. Vanguard SP Small Cap |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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