Correlation Between VanEck Steel and US Global

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

By analyzing existing cross correlation between VanEck Steel ETF and US Global Sea, you can compare the effects of market volatilities on VanEck Steel and US Global 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 Steel with a short position of US Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Steel and US Global.

Diversification Opportunities for VanEck Steel and US Global

0.81

Correlation Coefficient

VanEck Steel  US Global

Very poor diversification

The 3 months correlation between VanEck and SEA is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Steel ETF and US Global Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Global Sea and VanEck Steel 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 Steel ETF are associated (or correlated) with US Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Global Sea has no effect on the direction of VanEck Steel i.e., VanEck Steel and US Global go up and down completely randomly.

Pair Corralation between VanEck Steel and US Global

Considering the 90-day investment horizon VanEck Steel ETF is expected to generate 0.8 times more return on investment than US Global. However, VanEck Steel ETF is 1.25 times less risky than US Global. It trades about -0.05 of its potential returns per unit of risk. US Global Sea is currently generating about -0.24 per unit of risk. If you would invest  6,476  in VanEck Steel ETF on October 24, 2024 and sell it today you would lose (329.00) from holding VanEck Steel ETF or give up 5.08% of portfolio value over 90 days.

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

VanEck Steel ETF  vs.  US Global Sea

VanEck Steel ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Steel ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, VanEck Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

US Global Sea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Global Sea has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Etf's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with VanEck Steel and US Global

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

The idea behind VanEck Steel ETF and US Global Sea 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.