Correlation Between State Street and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both State Street 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 State Street and Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Aggregate and Vanguard Total Bond, you can compare the effects of market volatilities on State Street 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 State Street with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Vanguard Total.
Diversification Opportunities for State Street and Vanguard Total
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between State and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding State Street Aggregate and Vanguard Total Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Bond and State Street 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 State Street Aggregate 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 Bond has no effect on the direction of State Street i.e., State Street and Vanguard Total go up and down completely randomly.
Pair Corralation between State Street and Vanguard Total
Assuming the 90 days horizon State Street is expected to generate 1.02 times less return on investment than Vanguard Total. In addition to that, State Street is 1.04 times more volatile than Vanguard Total Bond. It trades about 0.06 of its total potential returns per unit of risk. Vanguard Total Bond is currently generating about 0.07 per unit of volatility. If you would invest 958.00 in Vanguard Total Bond on August 28, 2024 and sell it today you would earn a total of 5.00 from holding Vanguard Total Bond or generate 0.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Aggregate vs. Vanguard Total Bond
Performance |
| Timeline |
| State Street Aggregate |
| Vanguard Total Bond |
State Street and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Vanguard Total
The main advantage of trading using opposite State Street and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street 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.| State Street vs. State Street Target | State Street vs. State Street Target | State Street vs. Ssga International Stock | State Street vs. State Street Target |
| Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Stock | Vanguard Total vs. Vanguard Small Cap Index | Vanguard Total vs. Vanguard 500 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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