Correlation Between Alerian Energy and VanEck Oil

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

By analyzing existing cross correlation between Alerian Energy Infrastructure and VanEck Oil Refiners, you can compare the effects of market volatilities on Alerian Energy and VanEck Oil 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 Alerian Energy with a short position of VanEck Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alerian Energy and VanEck Oil.

Diversification Opportunities for Alerian Energy and VanEck Oil

0.78

Correlation Coefficient

Alerian Energy  VanEck Oil

Poor diversification

The 3 months correlation between Alerian and VanEck is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Alerian Energy Infrastructure and VanEck Oil Refiners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Oil Refiners and Alerian Energy 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 Alerian Energy Infrastructure are associated (or correlated) with VanEck Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Oil Refiners has no effect on the direction of Alerian Energy i.e., Alerian Energy and VanEck Oil go up and down completely randomly.

Pair Corralation between Alerian Energy and VanEck Oil

Given the investment horizon of 90 days Alerian Energy is expected to generate 4.53 times less return on investment than VanEck Oil. But when comparing it to its historical volatility, Alerian Energy Infrastructure is 1.05 times less risky than VanEck Oil. It trades about 0.02 of its potential returns per unit of risk. VanEck Oil Refiners is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,787  in VanEck Oil Refiners on March 4, 2025 and sell it today you would earn a total of  209.00  from holding VanEck Oil Refiners or generate 7.5% return on investment over 90 days.

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

Alerian Energy Infrastructure  vs.  VanEck Oil Refiners

Alerian Energy Infra

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alerian Energy Infrastructure are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Alerian Energy is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

VanEck Oil Refiners

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Oil Refiners are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, VanEck Oil may actually be approaching a critical reversion point that can send shares even higher in July 2025.

Pair Trading with Alerian Energy and VanEck Oil

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

The idea behind Alerian Energy Infrastructure and VanEck Oil Refiners 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.