Correlation Between Materials Select and VanEck Oil
Can any of the company-specific risk be diversified away by investing in both Materials Select 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 Materials Select and VanEck Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Materials Select Sector and VanEck Oil Services, you can compare the effects of market volatilities on Materials Select 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 Materials Select with a short position of VanEck Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Select and VanEck Oil.
Diversification Opportunities for Materials Select and VanEck Oil
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Materials and VanEck is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Materials Select Sector and VanEck Oil Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Oil Services and Materials Select 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 Materials Select Sector 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 Services has no effect on the direction of Materials Select i.e., Materials Select and VanEck Oil go up and down completely randomly.
Pair Corralation between Materials Select and VanEck Oil
Considering the 90-day investment horizon Materials Select Sector is expected to under-perform the VanEck Oil. But the etf apears to be less risky and, when comparing its historical volatility, Materials Select Sector is 2.03 times less risky than VanEck Oil. The etf trades about -0.06 of its potential returns per unit of risk. The VanEck Oil Services is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 26,621 in VanEck Oil Services on November 1, 2024 and sell it today you would earn a total of 1,315 from holding VanEck Oil Services or generate 4.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Materials Select Sector vs. VanEck Oil Services
Performance |
| Timeline |
| Materials Select Sector |
| VanEck Oil Services |
Materials Select and VanEck Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Materials Select and VanEck Oil
The main advantage of trading using opposite Materials Select and VanEck Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materials Select 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.| Materials Select vs. Industrial Select Sector | Materials Select vs. Consumer Discretionary Select | Materials Select vs. Consumer Staples Select | Materials Select vs. Utilities Select Sector |
| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal |