Correlation Between VanEck Semiconductor and Energy Select

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

Diversification Opportunities for VanEck Semiconductor and Energy Select

0.16

Correlation Coefficient

VanEck Semiconductor  Energy Select

Average diversification

The 3 months correlation between VanEck and Energy is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Semiconductor ETF and Energy Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Select Sector 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 Energy Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Select Sector has no effect on the direction of VanEck Semiconductor i.e., VanEck Semiconductor and Energy Select go up and down completely randomly.

Pair Corralation between VanEck Semiconductor and Energy Select

Considering the 90-day investment horizon VanEck Semiconductor ETF is expected to under-perform the Energy Select. In addition to that, VanEck Semiconductor is 1.93 times more volatile than Energy Select Sector. It trades about -0.07 of its total potential returns per unit of risk. Energy Select Sector is currently generating about 0.15 per unit of volatility. If you would invest  8,392  in Energy Select Sector on December 26, 2024 and sell it today you would earn a total of  986.00  from holding Energy Select Sector or generate 11.75% return on investment over 90 days.

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

VanEck Semiconductor ETF  vs.  Energy Select Sector

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.

Energy Select Sector

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Select Sector are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Energy Select may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with VanEck Semiconductor and Energy Select

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

The idea behind VanEck Semiconductor ETF and Energy 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.