Correlation Between SPDR SP and Vanguard Bond
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Vanguard Bond 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 Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 500 and Vanguard Bond Index, you can compare the effects of market volatilities on SPDR SP and Vanguard Bond 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 Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Vanguard Bond.
Diversification Opportunities for SPDR SP and Vanguard Bond
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SPDR and Vanguard is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Vanguard Bond Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Bond 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 500 are associated (or correlated) with Vanguard Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Bond Index has no effect on the direction of SPDR SP i.e., SPDR SP and Vanguard Bond go up and down completely randomly.
Pair Corralation between SPDR SP and Vanguard Bond
Assuming the 90 days trading horizon SPDR SP 500 is expected to generate 0.51 times more return on investment than Vanguard Bond. However, SPDR SP 500 is 1.96 times less risky than Vanguard Bond. It trades about 0.19 of its potential returns per unit of risk. Vanguard Bond Index is currently generating about 0.07 per unit of risk. If you would invest 742,549 in SPDR SP 500 on August 25, 2024 and sell it today you would earn a total of 476,641 from holding SPDR SP 500 or generate 64.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 71.43% |
| Values | Daily Returns |
SPDR SP 500 vs. Vanguard Bond Index
Performance |
| Timeline |
| SPDR SP 500 |
| Vanguard Bond Index |
SPDR SP and Vanguard Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Vanguard Bond
The main advantage of trading using opposite SPDR SP and Vanguard Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Vanguard Bond 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 Bond will offset losses from the drop in Vanguard Bond's long position.| SPDR SP vs. SPDR Dow Jones | SPDR SP vs. SPDR Gold Trust | SPDR SP vs. SPDR Series Trust | SPDR SP vs. SPDR SP Regional |
| Vanguard Bond vs. Vanguard Index Funds | Vanguard Bond vs. Vanguard Index Funds | Vanguard Bond vs. SPDR SP 500 | Vanguard Bond vs. iShares Trust |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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