Correlation Between Vanguard FTSE and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE 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 FTSE 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 FTSE Developed and SPDR SP World, you can compare the effects of market volatilities on Vanguard FTSE 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 FTSE with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and SPDR SP.
Diversification Opportunities for Vanguard FTSE and SPDR SP
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and SPDR is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and SPDR SP World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP World and Vanguard FTSE 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 FTSE Developed 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 World has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and SPDR SP go up and down completely randomly.
Pair Corralation between Vanguard FTSE and SPDR SP
Considering the 90-day investment horizon Vanguard FTSE Developed is expected to under-perform the SPDR SP. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard FTSE Developed is 1.03 times less risky than SPDR SP. The etf trades about -0.14 of its potential returns per unit of risk. The SPDR SP World is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 3,596 in SPDR SP World on August 24, 2024 and sell it today you would lose (81.00) from holding SPDR SP World or give up 2.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. SPDR SP World
Performance |
| Timeline |
| Vanguard FTSE Developed |
| SPDR SP World |
Vanguard FTSE and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and SPDR SP
The main advantage of trading using opposite Vanguard FTSE and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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 FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard Small Cap Index | Vanguard FTSE vs. Vanguard Value Index | Vanguard FTSE vs. Vanguard Small Cap Value |
| SPDR SP vs. SPDR Portfolio Emerging | SPDR SP vs. SPDR Portfolio SP | SPDR SP vs. SPDR Portfolio SP | SPDR SP vs. SPDR Russell Small |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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