Correlation Between VanEck Steel and SPDR SP
Can any of the company-specific risk be diversified away by investing in both VanEck Steel 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 Steel 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 Steel ETF and SPDR SP Metals, you can compare the effects of market volatilities on VanEck Steel 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 Steel with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Steel and SPDR SP.
Diversification Opportunities for VanEck Steel and SPDR SP
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between VanEck and SPDR is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Steel ETF and SPDR SP Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Metals and VanEck Steel 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 Steel ETF 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 Metals has no effect on the direction of VanEck Steel i.e., VanEck Steel and SPDR SP go up and down completely randomly.
Pair Corralation between VanEck Steel and SPDR SP
Considering the 90-day investment horizon VanEck Steel is expected to generate 1.27 times less return on investment than SPDR SP. But when comparing it to its historical volatility, VanEck Steel ETF is 1.07 times less risky than SPDR SP. It trades about 0.12 of its potential returns per unit of risk. SPDR SP Metals is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 6,454 in SPDR SP Metals on August 31, 2024 and sell it today you would earn a total of 389.00 from holding SPDR SP Metals or generate 6.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
VanEck Steel ETF vs. SPDR SP Metals
Performance |
| Timeline |
| VanEck Steel ETF |
| SPDR SP Metals |
VanEck Steel and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VanEck Steel and SPDR SP
The main advantage of trading using opposite VanEck Steel and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Steel 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 Steel vs. SPDR SP Metals | VanEck Steel vs. VanEck Agribusiness ETF | VanEck Steel vs. Invesco DB Base | VanEck Steel vs. Invesco DB Agriculture |
| SPDR SP vs. Materials Select Sector | SPDR SP vs. SPDR SP Oil | SPDR SP vs. SPDR SP Retail | SPDR SP vs. SPDR SP Homebuilders |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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