Correlation Between VanEck Steel and SPDR SP

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

Diversification Opportunities for VanEck Steel and SPDR SP

0.4

Correlation Coefficient

VanEck Steel  SPDR SP

Very weak diversification

The 3 months correlation between VanEck and SPDR is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Steel ETF and SPDR SP Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Metals 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Metals has no effect on the direction of VanEck Steel i.e., VanEck Steel and SPDR SP go up and down completely randomly.

Pair Corralation between VanEck Steel and SPDR SP

Considering the 90-day investment horizon VanEck Steel ETF is expected to generate 0.83 times more return on investment than SPDR SP. However, VanEck Steel ETF is 1.2 times less risky than SPDR SP. It trades about 0.11 of its potential returns per unit of risk. SPDR SP Metals is currently generating about 0.04 per unit of risk. If you would invest  5,828  in VanEck Steel ETF on December 27, 2024 and sell it today you would earn a total of  549.00  from holding VanEck Steel ETF or generate 9.42% return on investment over 90 days.

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

VanEck Steel ETF  vs.  SPDR SP Metals

VanEck Steel ETF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Steel ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, VanEck Steel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SPDR SP Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, SPDR SP is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with VanEck Steel and SPDR SP

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

The idea behind VanEck Steel ETF and SPDR SP Metals 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.