Correlation Between SPDR SP and VanEck Natural
Can any of the company-specific risk be diversified away by investing in both SPDR SP and VanEck Natural 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 SPDR SP and VanEck Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Global and VanEck Natural Resources, you can compare the effects of market volatilities on SPDR SP and VanEck Natural 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 SPDR SP with a short position of VanEck Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and VanEck Natural.
Diversification Opportunities for SPDR SP and VanEck Natural
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and VanEck is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Global and VanEck Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Natural Resources and SPDR SP 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 SPDR SP Global are associated (or correlated) with VanEck Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Natural Resources has no effect on the direction of SPDR SP i.e., SPDR SP and VanEck Natural go up and down completely randomly.
Pair Corralation between SPDR SP and VanEck Natural
Considering the 90-day investment horizon SPDR SP is expected to generate 2.33 times less return on investment than VanEck Natural. In addition to that, SPDR SP is 1.12 times more volatile than VanEck Natural Resources. It trades about 0.01 of its total potential returns per unit of risk. VanEck Natural Resources is currently generating about 0.02 per unit of volatility. If you would invest 4,826 in VanEck Natural Resources on August 25, 2024 and sell it today you would earn a total of 257.00 from holding VanEck Natural Resources or generate 5.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP Global vs. VanEck Natural Resources
Performance |
| Timeline |
| SPDR SP Global |
| VanEck Natural Resources |
SPDR SP and VanEck Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and VanEck Natural
The main advantage of trading using opposite SPDR SP and VanEck Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, VanEck Natural 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 Natural will offset losses from the drop in VanEck Natural's long position.The idea behind SPDR SP Global and VanEck Natural Resources 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 Natural vs. WisdomTree Continuous Commodity | VanEck Natural vs. VanEck UraniumNuclear Energy | VanEck Natural vs. SPDR SP Global |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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