Correlation Between Vanguard Small and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and SPDR SP 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 SP 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 SP 600, you can compare the effects of market volatilities on Vanguard Small and SPDR SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and SPDR SP.
Diversification Opportunities for Vanguard Small and SPDR SP
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and SPDR is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and SPDR SP 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 600 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 600 has no effect on the direction of Vanguard Small i.e., Vanguard Small and SPDR SP go up and down completely randomly.
Pair Corralation between Vanguard Small and SPDR SP
Allowing for the 90-day total investment horizon Vanguard Small is expected to generate 1.01 times less return on investment than SPDR SP. But when comparing it to its historical volatility, Vanguard Small Cap Index is 1.36 times less risky than SPDR SP. It trades about 0.24 of its potential returns per unit of risk. SPDR SP 600 is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 8,595 in SPDR SP 600 on August 23, 2024 and sell it today you would earn a total of 558.00 from holding SPDR SP 600 or generate 6.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. SPDR SP 600
Performance |
| Timeline |
| Vanguard Small Cap |
| SPDR SP 600 |
Vanguard Small and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and SPDR SP
The main advantage of trading using opposite Vanguard Small and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, SPDR SP 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 SP will offset losses from the drop in SPDR SP'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 SP vs. Dimensional ETF Trust | SPDR SP vs. Vanguard Small Cap Index | SPDR SP vs. First Trust Multi Manager | SPDR SP vs. Vanguard SP Small Cap |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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