Correlation Between SPDR SP and Vanguard Russell
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Vanguard Russell 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 Russell 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 Russell 2000, you can compare the effects of market volatilities on SPDR SP and Vanguard Russell 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 Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Vanguard Russell.
Diversification Opportunities for SPDR SP and Vanguard Russell
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between SPDR and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 600 and Vanguard Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Russell 2000 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 Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Russell 2000 has no effect on the direction of SPDR SP i.e., SPDR SP and Vanguard Russell go up and down completely randomly.
Pair Corralation between SPDR SP and Vanguard Russell
Given the investment horizon of 90 days SPDR SP is expected to generate 1.13 times less return on investment than Vanguard Russell. But when comparing it to its historical volatility, SPDR SP 600 is 1.0 times less risky than Vanguard Russell. It trades about 0.06 of its potential returns per unit of risk. Vanguard Russell 2000 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 11,557 in Vanguard Russell 2000 on August 27, 2024 and sell it today you would earn a total of 4,167 from holding Vanguard Russell 2000 or generate 36.06% 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 Russell 2000
Performance |
| Timeline |
| SPDR SP 600 |
| Vanguard Russell 2000 |
SPDR SP and Vanguard Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Vanguard Russell
The main advantage of trading using opposite SPDR SP and Vanguard Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Vanguard Russell 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 Russell will offset losses from the drop in Vanguard Russell'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 |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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