Correlation Between SPDR SP and VanEck Steel
Can any of the company-specific risk be diversified away by investing in both SPDR SP and VanEck Steel 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 SPDR SP and VanEck Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Metals and VanEck Steel ETF, you can compare the effects of market volatilities on SPDR SP and VanEck Steel 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 SPDR SP with a short position of VanEck Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and VanEck Steel.
Diversification Opportunities for SPDR SP and VanEck Steel
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and VanEck is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Metals and VanEck Steel ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Steel ETF and SPDR SP 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 SPDR SP Metals are associated (or correlated) with VanEck Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Steel ETF has no effect on the direction of SPDR SP i.e., SPDR SP and VanEck Steel go up and down completely randomly.
Pair Corralation between SPDR SP and VanEck Steel
Considering the 90-day investment horizon SPDR SP Metals is expected to generate 1.09 times more return on investment than VanEck Steel. However, SPDR SP is 1.09 times more volatile than VanEck Steel ETF. It trades about 0.12 of its potential returns per unit of risk. VanEck Steel ETF is currently generating about 0.09 per unit of risk. If you would invest 6,564 in SPDR SP Metals on August 27, 2024 and sell it today you would earn a total of 325.00 from holding SPDR SP Metals or generate 4.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP Metals vs. VanEck Steel ETF
Performance |
| Timeline |
| SPDR SP Metals |
| VanEck Steel ETF |
SPDR SP and VanEck Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and VanEck Steel
The main advantage of trading using opposite SPDR SP and VanEck Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, VanEck Steel 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 Steel will offset losses from the drop in VanEck Steel's long position.| SPDR SP vs. Materials Select Sector | SPDR SP vs. SPDR SP Oil | SPDR SP vs. SPDR SP Retail | SPDR SP vs. SPDR SP Homebuilders |
| VanEck Steel vs. SPDR SP Metals | VanEck Steel vs. VanEck Agribusiness ETF | VanEck Steel vs. Invesco DB Base | VanEck Steel vs. Invesco DB Agriculture |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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