Correlation Between VanEck Junior and Invesco DB

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

By analyzing existing cross correlation between VanEck Junior Gold and Invesco DB Base, you can compare the effects of market volatilities on VanEck Junior and Invesco DB 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 Junior with a short position of Invesco DB. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Junior and Invesco DB.

Diversification Opportunities for VanEck Junior and Invesco DB

0.78

Correlation Coefficient

VanEck Junior  Invesco DB

Poor diversification

The 3 months correlation between VanEck and Invesco is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Junior Gold and Invesco DB Base in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Base and VanEck Junior 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 Junior Gold are associated (or correlated) with Invesco DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Base has no effect on the direction of VanEck Junior i.e., VanEck Junior and Invesco DB go up and down completely randomly.

Pair Corralation between VanEck Junior and Invesco DB

Given the investment horizon of 90 days VanEck Junior Gold is expected to generate 2.21 times more return on investment than Invesco DB. However, VanEck Junior is 2.21 times more volatile than Invesco DB Base. It trades about 0.26 of its potential returns per unit of risk. Invesco DB Base is currently generating about 0.33 per unit of risk. If you would invest  3,166  in VanEck Junior Gold on February 27, 2024 and sell it today you would earn a total of  1,294  from holding VanEck Junior Gold or generate 40.87% return on investment over 90 days.

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

VanEck Junior Gold  vs.  Invesco DB Base

VanEck Junior Gold

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Junior Gold are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, VanEck Junior revealed solid returns over the last few months and may actually be approaching a breakup point.

Invesco DB Base

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Base are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Invesco DB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VanEck Junior and Invesco DB

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

The idea behind VanEck Junior Gold and Invesco DB Base 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 Global Correlations module to find global opportunities by holding instruments from different markets.