Correlation Between Energy Select and VanEck Oil
Can any of the company-specific risk be diversified away by investing in both Energy 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 Energy 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 Energy Select Sector and VanEck Oil Services, you can compare the effects of market volatilities on Energy 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 Energy Select with a short position of VanEck Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Select and VanEck Oil.
Diversification Opportunities for Energy Select and VanEck Oil
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Energy and VanEck is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Energy 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 Energy 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 Energy 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 Energy Select i.e., Energy Select and VanEck Oil go up and down completely randomly.
Pair Corralation between Energy Select and VanEck Oil
Considering the 90-day investment horizon Energy Select Sector is expected to generate 0.69 times more return on investment than VanEck Oil. However, Energy Select Sector is 1.45 times less risky than VanEck Oil. It trades about 0.03 of its potential returns per unit of risk. VanEck Oil Services is currently generating about 0.02 per unit of risk. If you would invest 7,930 in Energy Select Sector on August 28, 2024 and sell it today you would earn a total of 1,605 from holding Energy Select Sector or generate 20.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Select Sector vs. VanEck Oil Services
Performance |
| Timeline |
| Energy Select Sector |
| VanEck Oil Services |
Energy Select and VanEck Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Select and VanEck Oil
The main advantage of trading using opposite Energy Select and VanEck Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy 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.| Energy Select vs. Financial Select Sector | Energy Select vs. Health Care Select | Energy Select vs. Technology Select Sector | Energy 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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