Correlation Between VanEck Morningstar and IShares SP

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

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

Diversification Opportunities for VanEck Morningstar and IShares SP

0.61

Correlation Coefficient

VanEck Morningstar  IShares SP

Poor diversification

The 3 months correlation between VanEck and IShares is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Morningstar Wide and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 and VanEck Morningstar 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 Morningstar Wide are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of VanEck Morningstar i.e., VanEck Morningstar and IShares SP go up and down completely randomly.

Pair Corralation between VanEck Morningstar and IShares SP

Assuming the 90 days trading horizon VanEck Morningstar Wide is expected to under-perform the IShares SP. But the etf apears to be less risky and, when comparing its historical volatility, VanEck Morningstar Wide is 1.27 times less risky than IShares SP. The etf trades about -0.12 of its potential returns per unit of risk. The iShares SP 500 is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  5,471  in iShares SP 500 on December 30, 2024 and sell it today you would lose (241.00) from holding iShares SP 500 or give up 4.41% of portfolio value over 90 days.

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

VanEck Morningstar Wide  vs.  iShares SP 500

VanEck Morningstar Wide

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Morningstar Wide has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, VanEck Morningstar is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares SP 500

Risk-Adjusted Performance

Very 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 comparatively stable basic indicators, IShares SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with VanEck Morningstar and IShares SP

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

The idea behind VanEck Morningstar Wide and iShares SP 500 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.