Correlation Between VanEck Oil and Financial Select
Can any of the company-specific risk be diversified away by investing in both VanEck Oil and Financial Select 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 VanEck Oil and Financial Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VanEck Oil Refiners and Financial Select Sector, you can compare the effects of market volatilities on VanEck Oil and Financial Select 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 VanEck Oil with a short position of Financial Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Oil and Financial Select.
Diversification Opportunities for VanEck Oil and Financial Select
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between VanEck and Financial is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Oil Refiners and Financial Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Select Sector and VanEck Oil 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 VanEck Oil Refiners are associated (or correlated) with Financial Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Select Sector has no effect on the direction of VanEck Oil i.e., VanEck Oil and Financial Select go up and down completely randomly.
Pair Corralation between VanEck Oil and Financial Select
Given the investment horizon of 90 days VanEck Oil Refiners is expected to generate 1.47 times more return on investment than Financial Select. However, VanEck Oil is 1.47 times more volatile than Financial Select Sector. It trades about -0.14 of its potential returns per unit of risk. Financial Select Sector is currently generating about -0.25 per unit of risk. If you would invest 3,838 in VanEck Oil Refiners on January 20, 2024 and sell it today you would lose (130.00) from holding VanEck Oil Refiners or give up 3.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
VanEck Oil Refiners vs. Financial Select Sector
Performance |
| Timeline |
| VanEck Oil Refiners |
| Financial Select Sector |
VanEck Oil and Financial Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VanEck Oil and Financial Select
The main advantage of trading using opposite VanEck Oil and Financial Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Oil position performs unexpectedly, Financial Select 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 Financial Select will offset losses from the drop in Financial Select's long position.| VanEck Oil vs. iShares MSCI Global | VanEck Oil vs. First Trust Nasdaq | VanEck Oil vs. Invesco SP SmallCap | VanEck Oil vs. Alerian Energy Infrastructure |
| Financial Select vs. Energy Select Sector | Financial Select vs. Technology Select Sector | Financial Select vs. Health Care Select | Financial Select vs. Industrial Select Sector |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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