Correlation Between Vanguard Emerging and VanEck China
Can any of the company-specific risk be diversified away by investing in both Vanguard Emerging and VanEck China 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 Vanguard Emerging and VanEck China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Emerging Markets and VanEck China Bond, you can compare the effects of market volatilities on Vanguard Emerging and VanEck China 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 Vanguard Emerging with a short position of VanEck China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Emerging and VanEck China.
Diversification Opportunities for Vanguard Emerging and VanEck China
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and VanEck is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Emerging Markets and VanEck China Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck China Bond and Vanguard Emerging 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 Vanguard Emerging Markets are associated (or correlated) with VanEck China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck China Bond has no effect on the direction of Vanguard Emerging i.e., Vanguard Emerging and VanEck China go up and down completely randomly.
Pair Corralation between Vanguard Emerging and VanEck China
Given the investment horizon of 90 days Vanguard Emerging Markets is expected to generate 1.64 times more return on investment than VanEck China. However, Vanguard Emerging is 1.64 times more volatile than VanEck China Bond. It trades about 0.1 of its potential returns per unit of risk. VanEck China Bond is currently generating about 0.06 per unit of risk. If you would invest 5,644 in Vanguard Emerging Markets on August 29, 2024 and sell it today you would earn a total of 859.00 from holding Vanguard Emerging Markets or generate 15.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Emerging Markets vs. VanEck China Bond
Performance |
| Timeline |
| Vanguard Emerging Markets |
| VanEck China Bond |
Vanguard Emerging and VanEck China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Emerging and VanEck China
The main advantage of trading using opposite Vanguard Emerging and VanEck China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Emerging position performs unexpectedly, VanEck China 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 China will offset losses from the drop in VanEck China's long position.The idea behind Vanguard Emerging Markets and VanEck China Bond 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.
| VanEck China vs. SPDR Bloomberg Emerging | VanEck China vs. Vanguard Emerging Markets | VanEck China vs. SPDR Bloomberg Barclays | VanEck China vs. VanEck JP Morgan |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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