Correlation Between Vaneck Retail and US Home

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Can any of the company-specific risk be diversified away by investing in both Vaneck Retail and US Home 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 Retail and US Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vaneck Retail ETF and US Home Construction, you can compare the effects of market volatilities on Vaneck Retail and US Home 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 Retail with a short position of US Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vaneck Retail and US Home.

Diversification Opportunities for Vaneck Retail and US Home

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Vaneck and US Home is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vaneck Retail ETF and US Home Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Home Construction and Vaneck Retail 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 Retail ETF are associated (or correlated) with US Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Home Construction has no effect on the direction of Vaneck Retail i.e., Vaneck Retail and US Home go up and down completely randomly.

Pair Corralation between Vaneck Retail and US Home

Considering the 90-day investment horizon Vaneck Retail ETF is expected to generate 0.7 times more return on investment than US Home. However, Vaneck Retail ETF is 1.42 times less risky than US Home. It trades about 0.22 of its potential returns per unit of risk. US Home Construction is currently generating about 0.07 per unit of risk. If you would invest  16,507  in Vaneck Retail ETF on May 21, 2022 and sell it today you would earn a total of  1,122  from holding Vaneck Retail ETF or generate 6.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Vaneck Retail ETF  vs.  US Home Construction

 Performance (%) 
       Timeline  
Vaneck Retail ETF 
Vaneck Performance
13 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Vaneck Retail ETF are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Vaneck Retail reported solid returns over the last few months and may actually be approaching a breakup point.

Vaneck Price Channel

US Home Construction 
US Home Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in US Home Construction are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, US Home may actually be approaching a critical reversion point that can send shares even higher in September 2022.

US Home Price Channel

Vaneck Retail and US Home Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vaneck Retail and US Home

The main advantage of trading using opposite Vaneck Retail and US Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vaneck Retail position performs unexpectedly, US Home 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 US Home will offset losses from the drop in US Home's long position.

Vaneck Retail ETF

Pair trading matchups for Vaneck Retail

The idea behind Vaneck Retail ETF and US Home Construction 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.

US Home Construction

Pair trading matchups for US Home

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 Global Correlations module to find global opportunities by holding instruments from different markets.

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