Correlation Between Vanguard Small and SPDR Dow
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and SPDR Dow 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 Small and SPDR Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Index and SPDR Dow Jones, you can compare the effects of market volatilities on Vanguard Small and SPDR Dow 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 Small with a short position of SPDR Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and SPDR Dow.
Diversification Opportunities for Vanguard Small and SPDR Dow
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and SPDR is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and SPDR Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Dow Jones and Vanguard Small 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 Small Cap Index are associated (or correlated) with SPDR Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Dow Jones has no effect on the direction of Vanguard Small i.e., Vanguard Small and SPDR Dow go up and down completely randomly.
Pair Corralation between Vanguard Small and SPDR Dow
Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 1.1 times more return on investment than SPDR Dow. However, Vanguard Small is 1.1 times more volatile than SPDR Dow Jones. It trades about 0.08 of its potential returns per unit of risk. SPDR Dow Jones is currently generating about 0.04 per unit of risk. If you would invest 18,521 in Vanguard Small Cap Index on August 24, 2024 and sell it today you would earn a total of 7,252 from holding Vanguard Small Cap Index or generate 39.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. SPDR Dow Jones
Performance |
| Timeline |
| Vanguard Small Cap |
| SPDR Dow Jones |
Vanguard Small and SPDR Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and SPDR Dow
The main advantage of trading using opposite Vanguard Small and SPDR Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, SPDR Dow 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 Dow will offset losses from the drop in SPDR Dow's long position.| Vanguard Small vs. Vanguard Mid Cap Index | Vanguard Small vs. Vanguard Small Cap Value | Vanguard Small vs. Vanguard FTSE Emerging | Vanguard Small vs. Vanguard Large Cap Index |
| SPDR Dow vs. SPDR Dow Jones | SPDR Dow vs. iShares International Developed | SPDR Dow vs. SPDR Dow Jones | SPDR Dow vs. SPDR SP 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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