Correlation Between SPDR SP and Vanguard Financials
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Vanguard Financials 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 SP and Vanguard Financials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Capital and Vanguard Financials Index, you can compare the effects of market volatilities on SPDR SP and Vanguard Financials 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 SP with a short position of Vanguard Financials. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Vanguard Financials.
Diversification Opportunities for SPDR SP and Vanguard Financials
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Capital and Vanguard Financials Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Financials Index and SPDR SP 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 SP Capital are associated (or correlated) with Vanguard Financials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Financials Index has no effect on the direction of SPDR SP i.e., SPDR SP and Vanguard Financials go up and down completely randomly.
Pair Corralation between SPDR SP and Vanguard Financials
Considering the 90-day investment horizon SPDR SP Capital is expected to generate 1.09 times more return on investment than Vanguard Financials. However, SPDR SP is 1.09 times more volatile than Vanguard Financials Index. It trades about 0.3 of its potential returns per unit of risk. Vanguard Financials Index is currently generating about 0.32 per unit of risk. If you would invest 13,196 in SPDR SP Capital on September 1, 2024 and sell it today you would earn a total of 1,610 from holding SPDR SP Capital or generate 12.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
SPDR SP Capital vs. Vanguard Financials Index
Performance |
| Timeline |
| SPDR SP Capital |
| Vanguard Financials Index |
SPDR SP and Vanguard Financials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Vanguard Financials
The main advantage of trading using opposite SPDR SP and Vanguard Financials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Vanguard Financials 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 Financials will offset losses from the drop in Vanguard Financials' long position.| SPDR SP vs. Vanguard Financials Index | SPDR SP vs. SPDR SP Bank | SPDR SP vs. Fidelity MSCI Financials | SPDR SP vs. iShares MSCI Europe |
| Vanguard Financials vs. SPDR SP Bank | Vanguard Financials vs. Fidelity MSCI Financials | Vanguard Financials vs. iShares MSCI Europe | Vanguard Financials vs. First Trust Financials |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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