Correlation Between SPDR SPASX and VanEck Morningstar

Can any of the company-specific risk be diversified away by investing in both SPDR SPASX 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 SPASX 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 SPASX 200 and VanEck Morningstar Wide, you can compare the effects of market volatilities on SPDR SPASX 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 SPASX with a short position of VanEck Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SPASX and VanEck Morningstar.

Diversification Opportunities for SPDR SPASX and VanEck Morningstar

-0.24

Correlation Coefficient

SPDR SPASX  VanEck Morningstar

Very good diversification

The 3 months correlation between SPDR and VanEck is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SPASX 200 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 SPASX 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 SPASX 200 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 SPASX i.e., SPDR SPASX and VanEck Morningstar go up and down completely randomly.

Pair Corralation between SPDR SPASX and VanEck Morningstar

Assuming the 90 days trading horizon SPDR SPASX is expected to generate 1.81 times less return on investment than VanEck Morningstar. In addition to that, SPDR SPASX is 1.66 times more volatile than VanEck Morningstar Wide. It trades about 0.07 of its total potential returns per unit of risk. VanEck Morningstar Wide is currently generating about 0.21 per unit of volatility. If you would invest  12,198  in VanEck Morningstar Wide on September 13, 2024 and sell it today you would earn a total of  1,255  from holding VanEck Morningstar Wide or generate 10.29% return on investment over 90 days.

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

SPDR SPASX 200  vs.  VanEck Morningstar Wide

SPDR SPASX 200

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SPASX 200 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR SPASX 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

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Morningstar Wide are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, VanEck Morningstar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPDR SPASX and VanEck Morningstar

The main advantage of trading using opposite SPDR SPASX and VanEck Morningstar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SPASX 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 SPASX 200 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.