Correlation Between Vanguard FTSE and SPDR Dow
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE 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 FTSE 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 FTSE Developed and SPDR Dow Jones, you can compare the effects of market volatilities on Vanguard FTSE 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 FTSE with a short position of SPDR Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and SPDR Dow.
Diversification Opportunities for Vanguard FTSE and SPDR Dow
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and SPDR is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed 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 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 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 FTSE i.e., Vanguard FTSE and SPDR Dow go up and down completely randomly.
Pair Corralation between Vanguard FTSE and SPDR Dow
Assuming the 90 days trading horizon Vanguard FTSE is expected to generate 1.3 times less return on investment than SPDR Dow. But when comparing it to its historical volatility, Vanguard FTSE Developed is 1.0 times less risky than SPDR Dow. It trades about 0.07 of its potential returns per unit of risk. SPDR Dow Jones is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 30,402 in SPDR Dow Jones on September 14, 2024 and sell it today you would earn a total of 11,793 from holding SPDR Dow Jones or generate 38.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. SPDR Dow Jones
Performance |
| Timeline |
| Vanguard FTSE Developed |
| SPDR Dow Jones |
Vanguard FTSE and SPDR Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and SPDR Dow
The main advantage of trading using opposite Vanguard FTSE and SPDR Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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 FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. iShares Core FTSE | Vanguard FTSE vs. HSBC MSCI Japan |
| SPDR Dow vs. iShares Core MSCI | SPDR Dow vs. iShares SP 500 | SPDR Dow vs. iShares Core MSCI | SPDR Dow vs. iShares MSCI World |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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