Correlation Between SPDR Portfolio and Vanguard Value
Can any of the company-specific risk be diversified away by investing in both SPDR Portfolio and Vanguard Value 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 Portfolio and Vanguard Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Portfolio SP and Vanguard Value Index, you can compare the effects of market volatilities on SPDR Portfolio and Vanguard Value 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 Portfolio with a short position of Vanguard Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and Vanguard Value.
Diversification Opportunities for SPDR Portfolio and Vanguard Value
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio SP and Vanguard Value Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Value Index and SPDR Portfolio 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 Portfolio SP are associated (or correlated) with Vanguard Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Value Index has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and Vanguard Value go up and down completely randomly.
Pair Corralation between SPDR Portfolio and Vanguard Value
Given the investment horizon of 90 days SPDR Portfolio is expected to generate 1.84 times less return on investment than Vanguard Value. But when comparing it to its historical volatility, SPDR Portfolio SP is 1.06 times less risky than Vanguard Value. It trades about 0.04 of its potential returns per unit of risk. Vanguard Value Index is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 16,908 in Vanguard Value Index on November 2, 2024 and sell it today you would earn a total of 869.00 from holding Vanguard Value Index or generate 5.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Portfolio SP vs. Vanguard Value Index
Performance |
| Timeline |
| SPDR Portfolio SP |
| Vanguard Value Index |
SPDR Portfolio and Vanguard Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Portfolio and Vanguard Value
The main advantage of trading using opposite SPDR Portfolio and Vanguard Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Portfolio position performs unexpectedly, Vanguard Value 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 Value will offset losses from the drop in Vanguard Value's long position.| SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. SPDR SP 600 |
| Vanguard Value vs. Vanguard Growth Index | Vanguard Value vs. Vanguard Small Cap Value | Vanguard Value vs. Vanguard Mid Cap Value | Vanguard Value vs. Vanguard Small Cap Index |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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