Correlation Between SPDR SP and VanEck Morningstar

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

By analyzing existing cross correlation between SPDR SP 500 and VanEck Morningstar Wide, you can compare the effects of market volatilities on SPDR SP and VanEck Morningstar 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 SP with a short position of VanEck Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and VanEck Morningstar.

Diversification Opportunities for SPDR SP and VanEck Morningstar

0.79

Correlation Coefficient

SPDR SP  VanEck Morningstar

Poor diversification

The 3 months correlation between SPDR and VanEck is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and VanEck Morningstar Wide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Morningstar Wide and SPDR SP 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 SP 500 are associated (or correlated) with VanEck Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Morningstar Wide has no effect on the direction of SPDR SP i.e., SPDR SP and VanEck Morningstar go up and down completely randomly.

Pair Corralation between SPDR SP and VanEck Morningstar

Assuming the 90 days trading horizon SPDR SP 500 is expected to generate 0.97 times more return on investment than VanEck Morningstar. However, SPDR SP 500 is 1.03 times less risky than VanEck Morningstar. It trades about -0.11 of its potential returns per unit of risk. VanEck Morningstar Wide is currently generating about -0.12 per unit of risk. If you would invest  94,976  in SPDR SP 500 on December 29, 2024 and sell it today you would lose (4,650) from holding SPDR SP 500 or give up 4.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

SPDR SP 500  vs.  VanEck Morningstar Wide

SPDR SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SPDR SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

VanEck Morningstar Wide

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Morningstar Wide has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, VanEck Morningstar is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR SP and VanEck Morningstar

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

The idea behind SPDR SP 500 and VanEck Morningstar Wide 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 Global Correlations module to find global opportunities by holding instruments from different markets.