Correlation Between VanEck Semiconductor and SPDR FactSet

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

Diversification Opportunities for VanEck Semiconductor and SPDR FactSet

0.24

Correlation Coefficient

VanEck Semiconductor  SPDR FactSet

Modest diversification

The 3 months correlation between VanEck and SPDR is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Semiconductor ETF and SPDR FactSet Innovative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR FactSet Innovative 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 FactSet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR FactSet Innovative has no effect on the direction of VanEck Semiconductor i.e., VanEck Semiconductor and SPDR FactSet go up and down completely randomly.

Pair Corralation between VanEck Semiconductor and SPDR FactSet

Considering the 90-day investment horizon VanEck Semiconductor is expected to generate 4.52 times less return on investment than SPDR FactSet. In addition to that, VanEck Semiconductor is 1.32 times more volatile than SPDR FactSet Innovative. It trades about 0.04 of its total potential returns per unit of risk. SPDR FactSet Innovative is currently generating about 0.25 per unit of volatility. If you would invest  14,897  in SPDR FactSet Innovative on September 13, 2024 and sell it today you would earn a total of  3,360  from holding SPDR FactSet Innovative or generate 22.55% return on investment 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 FactSet Innovative

VanEck Semiconductor ETF

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Semiconductor ETF are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, VanEck Semiconductor is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

SPDR FactSet Innovative

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR FactSet Innovative are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, SPDR FactSet disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VanEck Semiconductor and SPDR FactSet

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

The idea behind VanEck Semiconductor ETF and SPDR FactSet Innovative 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.