Correlation Between VanEck Natural and SPDR SP

Can any of the company-specific risk be diversified away by investing in both VanEck Natural 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 Natural 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 Natural Resources and SPDR SP Global, you can compare the effects of market volatilities on VanEck Natural 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 Natural with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Natural and SPDR SP.

Diversification Opportunities for VanEck Natural and SPDR SP

0.92

Correlation Coefficient

VanEck Natural  SPDR SP

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 Natural Resources and SPDR SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Global and VanEck Natural 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 Natural Resources 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 Global has no effect on the direction of VanEck Natural i.e., VanEck Natural and SPDR SP go up and down completely randomly.

Pair Corralation between VanEck Natural and SPDR SP

Considering the 90-day investment horizon VanEck Natural Resources is expected to generate 0.9 times more return on investment than SPDR SP. However, VanEck Natural Resources is 1.11 times less risky than SPDR SP. It trades about -0.01 of its potential returns per unit of risk. SPDR SP Global is currently generating about -0.03 per unit of risk. If you would invest  4,901  in VanEck Natural Resources on September 19, 2024 and sell it today you would lose (117.00) from holding VanEck Natural Resources or give up 2.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.6%
Values	Daily Returns

VanEck Natural Resources  vs.  SPDR SP Global

VanEck Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

SPDR SP Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Global has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with VanEck Natural and SPDR SP

The main advantage of trading using opposite VanEck Natural and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Natural 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.

The idea behind VanEck Natural Resources and SPDR SP Global pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.