Correlation Between SPDR SP and Vanguard Short
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Vanguard Short 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 Short 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 Short Term Treasury, you can compare the effects of market volatilities on SPDR SP and Vanguard Short 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 Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Vanguard Short.
Diversification Opportunities for SPDR SP and Vanguard Short
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SPDR and Vanguard is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Vanguard Short Term Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Short Term 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 Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Short Term has no effect on the direction of SPDR SP i.e., SPDR SP and Vanguard Short go up and down completely randomly.
Pair Corralation between SPDR SP and Vanguard Short
Considering the 90-day investment horizon SPDR SP 500 is expected to generate 7.19 times more return on investment than Vanguard Short. However, SPDR SP is 7.19 times more volatile than Vanguard Short Term Treasury. It trades about 0.14 of its potential returns per unit of risk. Vanguard Short Term Treasury is currently generating about -0.09 per unit of risk. If you would invest 57,376 in SPDR SP 500 on August 30, 2024 and sell it today you would earn a total of 2,507 from holding SPDR SP 500 or generate 4.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 500 vs. Vanguard Short Term Treasury
Performance |
| Timeline |
| SPDR SP 500 |
| Vanguard Short Term |
SPDR SP and Vanguard Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Vanguard Short
The main advantage of trading using opposite SPDR SP and Vanguard Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Vanguard Short 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 Short will offset losses from the drop in Vanguard Short's long position.| SPDR SP vs. FT Vest Equity | SPDR SP vs. Northern Lights | SPDR SP vs. Dimensional International High | SPDR SP vs. First Trust Exchange Traded |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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