Correlation Between Beta Shares and VanEck Morningstar

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

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

Diversification Opportunities for Beta Shares and VanEck Morningstar

0.83

Correlation Coefficient

Beta Shares  VanEck Morningstar

Very poor diversification

The 3 months correlation between Beta and VanEck is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Beta Shares SPASX 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 Beta Shares 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 Beta Shares SPASX 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 Beta Shares i.e., Beta Shares and VanEck Morningstar go up and down completely randomly.

Pair Corralation between Beta Shares and VanEck Morningstar

Assuming the 90 days trading horizon Beta Shares is expected to generate 1.59 times less return on investment than VanEck Morningstar. In addition to that, Beta Shares is 1.3 times more volatile than VanEck Morningstar Wide. It trades about 0.09 of its total potential returns per unit of risk. VanEck Morningstar Wide is currently generating about 0.18 per unit of volatility. If you would invest  12,136  in VanEck Morningstar Wide on September 26, 2024 and sell it today you would earn a total of  1,139  from holding VanEck Morningstar Wide or generate 9.39% return on investment over 90 days.

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

Beta Shares SPASX  vs.  VanEck Morningstar Wide

Beta Shares SPASX

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beta Shares SPASX are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Beta Shares 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

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Morningstar Wide are ranked lower than 14 (%) 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 Beta Shares and VanEck Morningstar

The main advantage of trading using opposite Beta Shares and VanEck Morningstar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beta Shares 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 Beta Shares SPASX 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.

Check out your portfolio center.

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.