Correlation Between VanEck Semiconductor and SPDR Dow

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

Diversification Opportunities for VanEck Semiconductor and SPDR Dow

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between VanEck and SPDR is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Semiconductor ETF and SPDR Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Dow Jones 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 Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Dow Jones has no effect on the direction of VanEck Semiconductor i.e., VanEck Semiconductor and SPDR Dow go up and down completely randomly.

Pair Corralation between VanEck Semiconductor and SPDR Dow

Considering the 90-day investment horizon VanEck Semiconductor ETF is expected to generate 1.99 times more return on investment than SPDR Dow. However, VanEck Semiconductor is 1.99 times more volatile than SPDR Dow Jones. It trades about 0.1 of its potential returns per unit of risk. SPDR Dow Jones is currently generating about 0.07 per unit of risk. If you would invest  24,427  in VanEck Semiconductor ETF on September 5, 2024 and sell it today you would earn a total of  836.00  from holding VanEck Semiconductor ETF or generate 3.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

VanEck Semiconductor ETF  vs.  SPDR Dow Jones

 Performance 
       Timeline  
VanEck Semiconductor ETF 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Semiconductor ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak primary indicators, VanEck Semiconductor demonstrated solid returns over the last few months and may actually be approaching a breakup point.
SPDR Dow Jones 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SPDR Dow Jones has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, SPDR Dow is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

VanEck Semiconductor and SPDR Dow Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with VanEck Semiconductor and SPDR Dow

The main advantage of trading using opposite VanEck Semiconductor and SPDR Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Semiconductor position performs unexpectedly, SPDR Dow 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 Dow will offset losses from the drop in SPDR Dow's long position.
The idea behind VanEck Semiconductor ETF and SPDR Dow Jones 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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