Correlation Between SPDR MSCI and VanEck Inflation

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

Diversification Opportunities for SPDR MSCI and VanEck Inflation

-0.59

Correlation Coefficient

SPDR MSCI  VanEck Inflation

Excellent diversification

The 3 months correlation between SPDR and VanEck is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI EAFE 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 MSCI 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 MSCI EAFE 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 MSCI i.e., SPDR MSCI and VanEck Inflation go up and down completely randomly.

Pair Corralation between SPDR MSCI and VanEck Inflation

Given the investment horizon of 90 days SPDR MSCI EAFE is expected to generate 0.95 times more return on investment than VanEck Inflation. However, SPDR MSCI EAFE is 1.05 times less risky than VanEck Inflation. It trades about 0.06 of its potential returns per unit of risk. VanEck Inflation Allocation is currently generating about 0.05 per unit of risk. If you would invest  6,179  in SPDR MSCI EAFE on September 19, 2024 and sell it today you would earn a total of  1,358  from holding SPDR MSCI EAFE or generate 21.98% return on investment over 90 days.

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

SPDR MSCI EAFE  vs.  VanEck Inflation Allocation

SPDR MSCI EAFE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR MSCI EAFE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, SPDR MSCI is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

VanEck Inflation All

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Inflation Allocation are ranked lower than 1 (%) 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 MSCI and VanEck Inflation

The main advantage of trading using opposite SPDR MSCI and VanEck Inflation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI 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 MSCI EAFE 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.