Correlation Between VanEck Semiconductor and SPDR Kensho

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

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

Diversification Opportunities for VanEck Semiconductor and SPDR Kensho

0.37

Correlation Coefficient

VanEck Semiconductor  SPDR Kensho

Weak diversification

The 3 months correlation between VanEck and SPDR is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Semiconductor ETF and SPDR Kensho Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Kensho Clean and VanEck Semiconductor 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 Semiconductor ETF are associated (or correlated) with SPDR Kensho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Kensho Clean has no effect on the direction of VanEck Semiconductor i.e., VanEck Semiconductor and SPDR Kensho go up and down completely randomly.

Pair Corralation between VanEck Semiconductor and SPDR Kensho

Considering the 90-day investment horizon VanEck Semiconductor ETF is expected to generate 1.22 times more return on investment than SPDR Kensho. However, VanEck Semiconductor is 1.22 times more volatile than SPDR Kensho Clean. It trades about -0.14 of its potential returns per unit of risk. SPDR Kensho Clean is currently generating about -0.21 per unit of risk. If you would invest  23,878  in VanEck Semiconductor ETF on December 4, 2024 and sell it today you would lose (1,577) from holding VanEck Semiconductor ETF or give up 6.6% of portfolio value over 90 days.

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

VanEck Semiconductor ETF  vs.  SPDR Kensho Clean

VanEck Semiconductor ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Semiconductor ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's primary indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

SPDR Kensho Clean

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Kensho Clean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Pair Trading with VanEck Semiconductor and SPDR Kensho

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

The idea behind VanEck Semiconductor ETF and SPDR Kensho Clean 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.

Check out your portfolio center.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.