Correlation Between VanEck Steel and Utilities Select

Can any of the company-specific risk be diversified away by investing in both VanEck Steel and Utilities Select 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 Utilities Select 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 Utilities Select Sector, you can compare the effects of market volatilities on VanEck Steel and Utilities Select 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 Utilities Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Steel and Utilities Select.

Diversification Opportunities for VanEck Steel and Utilities Select

0.45

Correlation Coefficient

VanEck Steel  Utilities Select

Very weak diversification

The 3 months correlation between VanEck and Utilities is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Steel ETF and Utilities Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Select Sector 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 Utilities Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Select Sector has no effect on the direction of VanEck Steel i.e., VanEck Steel and Utilities Select go up and down completely randomly.

Pair Corralation between VanEck Steel and Utilities Select

Considering the 90-day investment horizon VanEck Steel ETF is expected to under-perform the Utilities Select. In addition to that, VanEck Steel is 1.54 times more volatile than Utilities Select Sector. It trades about -0.15 of its total potential returns per unit of risk. Utilities Select Sector is currently generating about -0.05 per unit of volatility. If you would invest  7,879  in Utilities Select Sector on October 5, 2024 and sell it today you would lose (252.00) from holding Utilities Select Sector or give up 3.2% of portfolio value over 90 days.

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

VanEck Steel ETF  vs.  Utilities Select Sector

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 unsteady performance in the last few months, the Etf's essential indicators remain fairly 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.

Utilities Select Sector

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with VanEck Steel and Utilities Select

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

The idea behind VanEck Steel ETF and Utilities Select Sector 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..