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 Oil, 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
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between VanEck and SPDR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Oil Services and SPDR SP Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Oil 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 Oil 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 1.93 times less return on investment than SPDR SP. In addition to that, VanEck Oil is 1.23 times more volatile than SPDR SP Oil. It trades about 0.02 of its total potential returns per unit of risk. SPDR SP Oil is currently generating about 0.05 per unit of volatility. If you would invest 13,075 in SPDR SP Oil on August 28, 2024 and sell it today you would earn a total of 1,529 from holding SPDR SP Oil or generate 11.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
VanEck Oil Services vs. SPDR SP Oil
Performance |
| Timeline |
| VanEck Oil Services |
| SPDR SP Oil |
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 |
| SPDR SP vs. VanEck Oil Services | SPDR SP vs. SPDR SP Metals | SPDR SP vs. Energy Select Sector | SPDR SP vs. SPDR SP Retail |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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