Correlation Between SPDR Barclays and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both SPDR Barclays and Vanguard Total 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 Barclays and Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Barclays Intermediate and Vanguard Total Corporate, you can compare the effects of market volatilities on SPDR Barclays and Vanguard Total 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 Barclays with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Barclays and Vanguard Total.
Diversification Opportunities for SPDR Barclays and Vanguard Total
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between SPDR and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Barclays Intermediate and Vanguard Total Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Corporate and SPDR Barclays 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 Barclays Intermediate are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Corporate has no effect on the direction of SPDR Barclays i.e., SPDR Barclays and Vanguard Total go up and down completely randomly.
Pair Corralation between SPDR Barclays and Vanguard Total
Given the investment horizon of 90 days SPDR Barclays is expected to generate 1.31 times less return on investment than Vanguard Total. But when comparing it to its historical volatility, SPDR Barclays Intermediate is 1.71 times less risky than Vanguard Total. It trades about 0.18 of its potential returns per unit of risk. Vanguard Total Corporate is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 7,675 in Vanguard Total Corporate on September 1, 2024 and sell it today you would earn a total of 105.00 from holding Vanguard Total Corporate or generate 1.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
SPDR Barclays Intermediate vs. Vanguard Total Corporate
Performance |
| Timeline |
| SPDR Barclays Interm |
| Vanguard Total Corporate |
SPDR Barclays and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Barclays and Vanguard Total
The main advantage of trading using opposite SPDR Barclays and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Barclays position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.| SPDR Barclays vs. SPDR Barclays Short | SPDR Barclays vs. SPDR Bloomberg Emerging | SPDR Barclays vs. SPDR Barclays Long | SPDR Barclays vs. SPDR Barclays Short |
| Vanguard Total vs. Vanguard Total World | Vanguard Total vs. Vanguard Long Term Corporate | Vanguard Total vs. Vanguard Emerging Markets | Vanguard Total vs. Vanguard Mortgage Backed Securities |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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