Correlation Between SPDR Barclays and VanEck Investment

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

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

Diversification Opportunities for SPDR Barclays and VanEck Investment

0.77

Correlation Coefficient

SPDR Barclays  VanEck Investment

Poor diversification

The 3 months correlation between SPDR and VanEck is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Barclays Long and VanEck Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Investment Grade and SPDR Barclays 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 SPDR Barclays Long are associated (or correlated) with VanEck Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Investment Grade has no effect on the direction of SPDR Barclays i.e., SPDR Barclays and VanEck Investment go up and down completely randomly.

Pair Corralation between SPDR Barclays and VanEck Investment

Given the investment horizon of 90 days SPDR Barclays Long is expected to generate 11.01 times more return on investment than VanEck Investment. However, SPDR Barclays is 11.01 times more volatile than VanEck Investment Grade. It trades about 0.04 of its potential returns per unit of risk. VanEck Investment Grade is currently generating about 0.39 per unit of risk. If you would invest  2,202  in SPDR Barclays Long on December 27, 2024 and sell it today you would earn a total of  28.00  from holding SPDR Barclays Long or generate 1.27% return on investment over 90 days.

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

SPDR Barclays Long  vs.  VanEck Investment Grade

SPDR Barclays Long

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Barclays Long are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, SPDR Barclays is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

VanEck Investment Grade

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Investment Grade are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, VanEck Investment is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SPDR Barclays and VanEck Investment

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

The idea behind SPDR Barclays Long and VanEck Investment Grade 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.