Correlation Between SPDR Dow and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both SPDR Dow and Vanguard FTSE 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 Dow and Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Dow Jones and Vanguard FTSE Developed, you can compare the effects of market volatilities on SPDR Dow and Vanguard FTSE 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 Dow with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Dow and Vanguard FTSE.
Diversification Opportunities for SPDR Dow and Vanguard FTSE
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPDR and Vanguard is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and Vanguard FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Developed and SPDR Dow 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 Dow Jones are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Developed has no effect on the direction of SPDR Dow i.e., SPDR Dow and Vanguard FTSE go up and down completely randomly.
Pair Corralation between SPDR Dow and Vanguard FTSE
Assuming the 90 days trading horizon SPDR Dow Jones is expected to generate 0.89 times more return on investment than Vanguard FTSE. However, SPDR Dow Jones is 1.13 times less risky than Vanguard FTSE. It trades about -0.07 of its potential returns per unit of risk. Vanguard FTSE Developed is currently generating about -0.25 per unit of risk. If you would invest 3,559 in SPDR Dow Jones on August 25, 2024 and sell it today you would lose (51.00) from holding SPDR Dow Jones or give up 1.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Dow Jones vs. Vanguard FTSE Developed
Performance |
| Timeline |
| SPDR Dow Jones |
| Vanguard FTSE Developed |
SPDR Dow and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Dow and Vanguard FTSE
The main advantage of trading using opposite SPDR Dow and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Dow position performs unexpectedly, Vanguard FTSE 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 Vanguard FTSE will offset losses from the drop in Vanguard FTSE's long position.| SPDR Dow vs. Vanguard FTSE Developed | SPDR Dow vs. Leverage Shares 2x | SPDR Dow vs. Amundi Index Solutions | SPDR Dow vs. Amundi Index Solutions |
| Vanguard FTSE vs. Leverage Shares 2x | Vanguard FTSE vs. Amundi Index Solutions | Vanguard FTSE vs. Amundi Index Solutions | Vanguard FTSE vs. Albion Venture Capital |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |