Correlation Between SPDR SP and VanEck BDC

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

By analyzing existing cross correlation between SPDR SP Regional and VanEck BDC Income, you can compare the effects of market volatilities on SPDR SP and VanEck BDC 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 BDC. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and VanEck BDC.

Diversification Opportunities for SPDR SP and VanEck BDC

0.66

Correlation Coefficient

SPDR SP  VanEck BDC

Poor diversification

The 3 months correlation between SPDR and VanEck is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Regional and VanEck BDC Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck BDC Income 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 Regional are associated (or correlated) with VanEck BDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck BDC Income has no effect on the direction of SPDR SP i.e., SPDR SP and VanEck BDC go up and down completely randomly.

Pair Corralation between SPDR SP and VanEck BDC

Considering the 90-day investment horizon SPDR SP Regional is expected to generate 3.64 times more return on investment than VanEck BDC. However, SPDR SP is 3.64 times more volatile than VanEck BDC Income. It trades about 0.06 of its potential returns per unit of risk. VanEck BDC Income is currently generating about 0.08 per unit of risk. If you would invest  5,685  in SPDR SP Regional on September 22, 2024 and sell it today you would earn a total of  396.00  from holding SPDR SP Regional or generate 6.97% return on investment over 90 days.

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

SPDR SP Regional  vs.  VanEck BDC Income

SPDR SP Regional

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Regional are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

VanEck BDC Income

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck BDC Income are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, VanEck BDC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR SP and VanEck BDC

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

The idea behind SPDR SP Regional and VanEck BDC Income 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.