Correlation Between IShares Global and VanEck Oil

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

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

Diversification Opportunities for IShares Global and VanEck Oil

0.87

Correlation Coefficient

IShares Global  VanEck Oil

Very poor diversification

The 3 months correlation between IShares and VanEck is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Energy and VanEck Oil Refiners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Oil Refiners and IShares Global 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 iShares Global Energy 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 Refiners has no effect on the direction of IShares Global i.e., IShares Global and VanEck Oil go up and down completely randomly.

Pair Corralation between IShares Global and VanEck Oil

Considering the 90-day investment horizon iShares Global Energy is expected to generate 1.09 times more return on investment than VanEck Oil. However, IShares Global is 1.09 times more volatile than VanEck Oil Refiners. It trades about 0.02 of its potential returns per unit of risk. VanEck Oil Refiners is currently generating about 0.01 per unit of risk. If you would invest  3,424  in iShares Global Energy on February 2, 2025 and sell it today you would earn a total of  357.00  from holding iShares Global Energy or generate 10.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

iShares Global Energy  vs.  VanEck Oil Refiners

iShares Global Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Global Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares Global is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

VanEck Oil Refiners

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Oil Refiners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, VanEck Oil is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares Global and VanEck Oil

The main advantage of trading using opposite IShares Global and VanEck Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global 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 iShares Global Energy and VanEck Oil Refiners 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 CEOs Directory module to screen CEOs from public companies around the world.