Correlation Between Vanguard Financials and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Vanguard Financials 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 Financials 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 Financials Index and SPDR SP Insurance, you can compare the effects of market volatilities on Vanguard Financials 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 Financials with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Financials and SPDR SP.
Diversification Opportunities for Vanguard Financials and SPDR SP
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and SPDR is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index and SPDR SP Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Insurance and Vanguard Financials 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 Financials 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 Insurance has no effect on the direction of Vanguard Financials i.e., Vanguard Financials and SPDR SP go up and down completely randomly.
Pair Corralation between Vanguard Financials and SPDR SP
Considering the 90-day investment horizon Vanguard Financials Index is expected to generate 1.31 times more return on investment than SPDR SP. However, Vanguard Financials is 1.31 times more volatile than SPDR SP Insurance. It trades about 0.23 of its potential returns per unit of risk. SPDR SP Insurance is currently generating about 0.21 per unit of risk. If you would invest 11,466 in Vanguard Financials Index on August 25, 2024 and sell it today you would earn a total of 1,013 from holding Vanguard Financials Index or generate 8.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Financials Index vs. SPDR SP Insurance
Performance |
| Timeline |
| Vanguard Financials Index |
| SPDR SP Insurance |
Vanguard Financials and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Financials and SPDR SP
The main advantage of trading using opposite Vanguard Financials and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Financials 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 Financials vs. Vanguard Industrials Index | Vanguard Financials vs. Vanguard Consumer Discretionary | Vanguard Financials vs. Vanguard Materials Index | Vanguard Financials vs. Vanguard Health Care |
| SPDR SP vs. SPDR SP Capital | SPDR SP vs. iShares Insurance ETF | SPDR SP vs. SPDR SP Bank | SPDR SP vs. iShares Broker Dealers Securities |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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