Correlation Between Vanguard FTSE and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and SPDR MSCI 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 MSCI 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 MSCI World, you can compare the effects of market volatilities on Vanguard FTSE and SPDR MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and SPDR MSCI.
Diversification Opportunities for Vanguard FTSE and SPDR MSCI
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and SPDR is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and SPDR MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI World has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and SPDR MSCI go up and down completely randomly.
Pair Corralation between Vanguard FTSE and SPDR MSCI
Assuming the 90 days trading horizon Vanguard FTSE is expected to generate 2.89 times less return on investment than SPDR MSCI. But when comparing it to its historical volatility, Vanguard FTSE Developed is 1.69 times less risky than SPDR MSCI. It trades about 0.07 of its potential returns per unit of risk. SPDR MSCI World is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 8,241 in SPDR MSCI World on September 12, 2024 and sell it today you would earn a total of 8,981 from holding SPDR MSCI World or generate 108.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. SPDR MSCI World
Performance |
| Timeline |
| Vanguard FTSE Developed |
| SPDR MSCI World |
Vanguard FTSE and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and SPDR MSCI
The main advantage of trading using opposite Vanguard FTSE and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, SPDR MSCI 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 MSCI will offset losses from the drop in SPDR MSCI'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 MSCI vs. SPDR Dow Jones | SPDR MSCI vs. iShares Core MSCI | SPDR MSCI vs. iShares SP 500 | SPDR MSCI vs. Vanguard FTSE All 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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