Correlation Between ETRACS Quarterly and VanEck Oil

Can any of the company-specific risk be diversified away by investing in both ETRACS Quarterly and VanEck Oil 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 ETRACS Quarterly and VanEck Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ETRACS Quarterly Pay and VanEck Oil Services, you can compare the effects of market volatilities on ETRACS Quarterly and VanEck Oil 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 ETRACS Quarterly with a short position of VanEck Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS Quarterly and VanEck Oil.

Diversification Opportunities for ETRACS Quarterly and VanEck Oil

0.85

Correlation Coefficient

ETRACS Quarterly  VanEck Oil

Very poor diversification

The 3 months correlation between ETRACS and VanEck is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS Quarterly Pay and VanEck Oil Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Oil Services and ETRACS Quarterly 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 ETRACS Quarterly Pay are associated (or correlated) with VanEck Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Oil Services has no effect on the direction of ETRACS Quarterly i.e., ETRACS Quarterly and VanEck Oil go up and down completely randomly.

Pair Corralation between ETRACS Quarterly and VanEck Oil

Given the investment horizon of 90 days ETRACS Quarterly Pay is expected to generate 0.67 times more return on investment than VanEck Oil. However, ETRACS Quarterly Pay is 1.49 times less risky than VanEck Oil. It trades about 0.11 of its potential returns per unit of risk. VanEck Oil Services is currently generating about 0.02 per unit of risk. If you would invest  3,858  in ETRACS Quarterly Pay on January 29, 2024 and sell it today you would earn a total of  1,820  from holding ETRACS Quarterly Pay or generate 47.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

ETRACS Quarterly Pay  vs.  VanEck Oil Services

ETRACS Quarterly Pay

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Quarterly Pay are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, ETRACS Quarterly may actually be approaching a critical reversion point that can send shares even higher in May 2024.

VanEck Oil Services

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Oil Services are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, VanEck Oil may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with ETRACS Quarterly and VanEck Oil

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

The idea behind ETRACS Quarterly Pay and VanEck Oil Services 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.