Correlation Between SPDR Portfolio and VanEck Morningstar

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

Diversification Opportunities for SPDR Portfolio and VanEck Morningstar

0.77

Correlation Coefficient

SPDR Portfolio  VanEck Morningstar

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 Portfolio SP 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 Portfolio 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 Portfolio SP 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 Portfolio i.e., SPDR Portfolio and VanEck Morningstar go up and down completely randomly.

Pair Corralation between SPDR Portfolio and VanEck Morningstar

Given the investment horizon of 90 days SPDR Portfolio SP is expected to generate 1.17 times more return on investment than VanEck Morningstar. However, SPDR Portfolio is 1.17 times more volatile than VanEck Morningstar Wide. It trades about 0.18 of its potential returns per unit of risk. VanEck Morningstar Wide is currently generating about 0.09 per unit of risk. If you would invest  7,813  in SPDR Portfolio SP on September 2, 2024 and sell it today you would earn a total of  923.00  from holding SPDR Portfolio SP or generate 11.81% return on investment over 90 days.

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

SPDR Portfolio SP  vs.  VanEck Morningstar Wide

SPDR Portfolio SP

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio SP are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SPDR Portfolio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

VanEck Morningstar Wide

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Morningstar Wide are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, VanEck Morningstar is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SPDR Portfolio and VanEck Morningstar

The main advantage of trading using opposite SPDR Portfolio and VanEck Morningstar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Portfolio 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 Portfolio SP 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.