Correlation Between SPDR SP and Vanguard Small
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Vanguard Small 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 Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 600 and Vanguard Small Cap Value, you can compare the effects of market volatilities on SPDR SP and Vanguard Small 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 Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Vanguard Small.
Diversification Opportunities for SPDR SP and Vanguard Small
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and Vanguard is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 600 and Vanguard Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap 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 600 are associated (or correlated) with Vanguard Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of SPDR SP i.e., SPDR SP and Vanguard Small go up and down completely randomly.
Pair Corralation between SPDR SP and Vanguard Small
Given the investment horizon of 90 days SPDR SP 600 is expected to generate 1.34 times more return on investment than Vanguard Small. However, SPDR SP is 1.34 times more volatile than Vanguard Small Cap Value. It trades about 0.21 of its potential returns per unit of risk. Vanguard Small Cap Value is currently generating about 0.24 per unit of risk. If you would invest 8,673 in SPDR SP 600 on August 27, 2024 and sell it today you would earn a total of 650.00 from holding SPDR SP 600 or generate 7.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 600 vs. Vanguard Small Cap Value
Performance |
| Timeline |
| SPDR SP 600 |
| Vanguard Small Cap |
SPDR SP and Vanguard Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Vanguard Small
The main advantage of trading using opposite SPDR SP and Vanguard Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Vanguard Small 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 Small will offset losses from the drop in Vanguard Small's long position.| SPDR SP vs. Dimensional ETF Trust | SPDR SP vs. Vanguard Small Cap Index | SPDR SP vs. First Trust Multi Manager | SPDR SP vs. Vanguard SP Small Cap |
| Vanguard Small vs. Vanguard Mid Cap Value | Vanguard Small vs. Vanguard Small Cap Growth | Vanguard Small vs. Vanguard Value Index | Vanguard Small vs. Vanguard Small Cap Index |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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