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 Regional, 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
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and SPDR is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index and SPDR SP Regional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Regional 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 Regional 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 is expected to generate 1.34 times less return on investment than SPDR SP. But when comparing it to its historical volatility, Vanguard Financials Index is 1.99 times less risky than SPDR SP. It trades about 0.32 of its potential returns per unit of risk. SPDR SP Regional is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 5,895 in SPDR SP Regional on September 1, 2024 and sell it today you would earn a total of 878.00 from holding SPDR SP Regional or generate 14.89% 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 Regional
Performance |
| Timeline |
| Vanguard Financials Index |
| SPDR SP Regional |
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. Financial Select Sector | Vanguard Financials vs. SPDR SP Bank | Vanguard Financials vs. Fidelity MSCI Financials | Vanguard Financials vs. iShares Financial Services |
| SPDR SP vs. SPDR SP Bank | SPDR SP vs. SPDR SP Retail | SPDR SP vs. SPDR SP Homebuilders | SPDR SP vs. Financial Select Sector |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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