Correlation Between IShares SP and VanEck Morningstar

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

By analyzing existing cross correlation between iShares SP 500 and VanEck Morningstar Durable, you can compare the effects of market volatilities on IShares SP and VanEck Morningstar 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 IShares SP with a short position of VanEck Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and VanEck Morningstar.

Diversification Opportunities for IShares SP and VanEck Morningstar

0.91

Correlation Coefficient

IShares SP  VanEck Morningstar

Almost no diversification

The 3 months correlation between IShares and VanEck is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and VanEck Morningstar Durable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Morningstar and IShares 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 iShares SP 500 are associated (or correlated) with VanEck Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Morningstar has no effect on the direction of IShares SP i.e., IShares SP and VanEck Morningstar go up and down completely randomly.

Pair Corralation between IShares SP and VanEck Morningstar

Considering the 90-day investment horizon iShares SP 500 is expected to generate 1.09 times more return on investment than VanEck Morningstar. However, IShares SP is 1.09 times more volatile than VanEck Morningstar Durable. It trades about -0.01 of its potential returns per unit of risk. VanEck Morningstar Durable is currently generating about -0.06 per unit of risk. If you would invest  19,624  in iShares SP 500 on October 26, 2024 and sell it today you would lose (83.00) from holding iShares SP 500 or give up 0.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

iShares SP 500  vs.  VanEck Morningstar Durable

iShares SP 500

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days iShares SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares SP is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

VanEck Morningstar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Morningstar Durable has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, VanEck Morningstar is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares SP and VanEck Morningstar

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

The idea behind iShares SP 500 and VanEck Morningstar Durable 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.