Correlation Between SPDR SSgA and VanEck Inflation

Can any of the company-specific risk be diversified away by investing in both SPDR SSgA and VanEck Inflation 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 SSgA and VanEck Inflation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPDR SSgA Income and VanEck Inflation Allocation, you can compare the effects of market volatilities on SPDR SSgA and VanEck Inflation 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 SSgA with a short position of VanEck Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SSgA and VanEck Inflation.

Diversification Opportunities for SPDR SSgA and VanEck Inflation

-0.06

Correlation Coefficient

SPDR SSgA  VanEck Inflation

Good diversification

The 3 months correlation between SPDR and VanEck is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SSgA Income and VanEck Inflation Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Inflation All and SPDR SSgA 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 SSgA Income are associated (or correlated) with VanEck Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Inflation All has no effect on the direction of SPDR SSgA i.e., SPDR SSgA and VanEck Inflation go up and down completely randomly.

Pair Corralation between SPDR SSgA and VanEck Inflation

Given the investment horizon of 90 days SPDR SSgA Income is expected to under-perform the VanEck Inflation. But the etf apears to be less risky and, when comparing its historical volatility, SPDR SSgA Income is 2.0 times less risky than VanEck Inflation. The etf trades about -0.01 of its potential returns per unit of risk. The VanEck Inflation Allocation is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,819  in VanEck Inflation Allocation on September 13, 2024 and sell it today you would earn a total of  158.00  from holding VanEck Inflation Allocation or generate 5.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SPDR SSgA Income  vs.  VanEck Inflation Allocation

SPDR SSgA Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SSgA Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, SPDR SSgA is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

VanEck Inflation All

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Inflation Allocation are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, VanEck Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR SSgA and VanEck Inflation

The main advantage of trading using opposite SPDR SSgA and VanEck Inflation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SSgA position performs unexpectedly, VanEck Inflation 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 Inflation will offset losses from the drop in VanEck Inflation's long position.

The idea behind SPDR SSgA Income and VanEck Inflation Allocation 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.