Correlation Between SSgA SPDR and Vanguard
Can any of the company-specific risk be diversified away by investing in both SSgA SPDR and Vanguard 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 SSgA SPDR and Vanguard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SSgA SPDR ETFs and Vanguard SP 500, you can compare the effects of market volatilities on SSgA SPDR and Vanguard 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 SSgA SPDR with a short position of Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of SSgA SPDR and Vanguard.
Diversification Opportunities for SSgA SPDR and Vanguard
Very good diversification
The 3 months correlation between SSgA and Vanguard is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding SSgA SPDR ETFs and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 and SSgA SPDR 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 SSgA SPDR ETFs are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of SSgA SPDR i.e., SSgA SPDR and Vanguard go up and down completely randomly.
Pair Corralation between SSgA SPDR and Vanguard
Assuming the 90 days trading horizon SSgA SPDR ETFs is expected to generate 1.26 times more return on investment than Vanguard. However, SSgA SPDR is 1.26 times more volatile than Vanguard SP 500. It trades about 0.33 of its potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.19 per unit of risk. If you would invest 4,004 in SSgA SPDR ETFs on October 20, 2024 and sell it today you would earn a total of 221.00 from holding SSgA SPDR ETFs or generate 5.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SSgA SPDR ETFs vs. Vanguard SP 500
Performance |
| Timeline |
| SSgA SPDR ETFs |
| Vanguard SP 500 |
SSgA SPDR and Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SSgA SPDR and Vanguard
The main advantage of trading using opposite SSgA SPDR and Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSgA SPDR position performs unexpectedly, Vanguard 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 will offset losses from the drop in Vanguard's long position.| SSgA SPDR vs. Vanguard SP 500 | SSgA SPDR vs. SPDR Dow Jones | SSgA SPDR vs. iShares Core MSCI | SSgA SPDR vs. iShares SP 500 |
| Vanguard vs. Vanguard FTSE All World | Vanguard vs. iShares Core MSCI | Vanguard vs. Vanguard FTSE All World | Vanguard vs. Vanguard FTSE Emerging |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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