Correlation Between VanEck Semiconductor and SPDR Morgan

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

Diversification Opportunities for VanEck Semiconductor and SPDR Morgan

0.73

Correlation Coefficient

VanEck Semiconductor  SPDR Morgan

Poor diversification

The 3 months correlation between VanEck and SPDR is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Semiconductor ETF and SPDR Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Morgan Stanley 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 Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Morgan Stanley has no effect on the direction of VanEck Semiconductor i.e., VanEck Semiconductor and SPDR Morgan go up and down completely randomly.

Pair Corralation between VanEck Semiconductor and SPDR Morgan

Considering the 90-day investment horizon VanEck Semiconductor ETF is expected to under-perform the SPDR Morgan. In addition to that, VanEck Semiconductor is 1.32 times more volatile than SPDR Morgan Stanley. It trades about -0.07 of its total potential returns per unit of risk. SPDR Morgan Stanley is currently generating about -0.01 per unit of volatility. If you would invest  20,374  in SPDR Morgan Stanley on December 28, 2024 and sell it today you would lose (533.00) from holding SPDR Morgan Stanley or give up 2.62% of portfolio value over 90 days.

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

VanEck Semiconductor ETF  vs.  SPDR Morgan Stanley

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 Morgan Stanley

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Morgan Stanley has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, SPDR Morgan is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with VanEck Semiconductor and SPDR Morgan

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

The idea behind VanEck Semiconductor ETF and SPDR Morgan Stanley 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.