Correlation Between SPDR SP and Vanguard International
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Vanguard International 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 International 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 International Equity, you can compare the effects of market volatilities on SPDR SP and Vanguard International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Vanguard International.
Diversification Opportunities for SPDR SP and Vanguard International
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SPDR and Vanguard is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Vanguard International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard International has no effect on the direction of SPDR SP i.e., SPDR SP and Vanguard International go up and down completely randomly.
Pair Corralation between SPDR SP and Vanguard International
Assuming the 90 days trading horizon SPDR SP 500 is expected to generate 0.66 times more return on investment than Vanguard International. However, SPDR SP 500 is 1.52 times less risky than Vanguard International. It trades about 0.03 of its potential returns per unit of risk. Vanguard International Equity is currently generating about -0.06 per unit of risk. If you would invest 1,217,271 in SPDR SP 500 on September 12, 2024 and sell it today you would earn a total of 5,929 from holding SPDR SP 500 or generate 0.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
SPDR SP 500 vs. Vanguard International Equity
Performance |
| Timeline |
| SPDR SP 500 |
| Vanguard International |
SPDR SP and Vanguard International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Vanguard International
The main advantage of trading using opposite SPDR SP and Vanguard International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Vanguard International 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 International will offset losses from the drop in Vanguard International'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 International vs. Vanguard Index Funds | Vanguard International vs. Vanguard Index Funds | Vanguard International vs. Vanguard STAR Funds | Vanguard International vs. SPDR SP 500 |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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