Correlation Between Vanguard Funds and SPDR Gold
Can any of the company-specific risk be diversified away by investing in both Vanguard Funds and SPDR Gold 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 Vanguard Funds and SPDR Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Funds PLC and SPDR Gold Shares, you can compare the effects of market volatilities on Vanguard Funds and SPDR Gold 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 Vanguard Funds with a short position of SPDR Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Funds and SPDR Gold.
Diversification Opportunities for Vanguard Funds and SPDR Gold
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and SPDR is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Funds PLC and SPDR Gold Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Gold Shares and Vanguard Funds 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 Vanguard Funds PLC are associated (or correlated) with SPDR Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Gold Shares has no effect on the direction of Vanguard Funds i.e., Vanguard Funds and SPDR Gold go up and down completely randomly.
Pair Corralation between Vanguard Funds and SPDR Gold
Assuming the 90 days trading horizon Vanguard Funds PLC is expected to generate 0.54 times more return on investment than SPDR Gold. However, Vanguard Funds PLC is 1.86 times less risky than SPDR Gold. It trades about 0.28 of its potential returns per unit of risk. SPDR Gold Shares is currently generating about -0.04 per unit of risk. If you would invest 2,884 in Vanguard Funds PLC on August 31, 2024 and sell it today you would earn a total of 96.00 from holding Vanguard Funds PLC or generate 3.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 85.71% |
| Values | Daily Returns |
Vanguard Funds PLC vs. SPDR Gold Shares
Performance |
| Timeline |
| Vanguard Funds PLC |
| SPDR Gold Shares |
Vanguard Funds and SPDR Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Funds and SPDR Gold
The main advantage of trading using opposite Vanguard Funds and SPDR Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Funds position performs unexpectedly, SPDR Gold 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 SPDR Gold will offset losses from the drop in SPDR Gold's long position.| Vanguard Funds vs. Vanguard ESG Developed | Vanguard Funds vs. Vanguard Funds Public | Vanguard Funds vs. Vanguard Funds Public | Vanguard Funds vs. Vanguard FTSE Developed |
| SPDR Gold vs. UBS Fund Solutions | SPDR Gold vs. Xtrackers II | SPDR Gold vs. Xtrackers Nikkei 225 | SPDR Gold vs. iShares VII PLC |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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