Correlation Between VanEck Oil and SPDR SP
Can any of the company-specific risk be diversified away by investing in both VanEck Oil and SPDR SP 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 Oil and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VanEck Oil Services and SPDR SP 400, you can compare the effects of market volatilities on VanEck Oil and SPDR SP 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 Oil with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Oil and SPDR SP.
Diversification Opportunities for VanEck Oil and SPDR SP
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VanEck and SPDR is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Oil Services and SPDR SP 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 400 and VanEck Oil 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 Oil Services are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 400 has no effect on the direction of VanEck Oil i.e., VanEck Oil and SPDR SP go up and down completely randomly.
Pair Corralation between VanEck Oil and SPDR SP
Considering the 90-day investment horizon VanEck Oil is expected to generate 6.1 times less return on investment than SPDR SP. In addition to that, VanEck Oil is 1.65 times more volatile than SPDR SP 400. It trades about 0.01 of its total potential returns per unit of risk. SPDR SP 400 is currently generating about 0.07 per unit of volatility. If you would invest 6,958 in SPDR SP 400 on November 9, 2024 and sell it today you would earn a total of 1,364 from holding SPDR SP 400 or generate 19.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
VanEck Oil Services vs. SPDR SP 400
Performance |
| Timeline |
| VanEck Oil Services |
| SPDR SP 400 |
VanEck Oil and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VanEck Oil and SPDR SP
The main advantage of trading using opposite VanEck Oil and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Oil position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.| VanEck Oil vs. SPDR SP Oil | VanEck Oil vs. Energy Select Sector | VanEck Oil vs. VanEck Semiconductor ETF | VanEck Oil vs. Materials Select Sector |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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