Correlation Between Vanguard Health and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Vanguard Health 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 Health 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 Health Care and SPDR SP Biotech, you can compare the effects of market volatilities on Vanguard Health 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 Health with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Health and SPDR SP.
Diversification Opportunities for Vanguard Health and SPDR SP
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and SPDR is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Health Care and SPDR SP Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Biotech and Vanguard Health 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 Health Care 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 Biotech has no effect on the direction of Vanguard Health i.e., Vanguard Health and SPDR SP go up and down completely randomly.
Pair Corralation between Vanguard Health and SPDR SP
Considering the 90-day investment horizon Vanguard Health is expected to generate 2.41 times less return on investment than SPDR SP. But when comparing it to its historical volatility, Vanguard Health Care is 1.95 times less risky than SPDR SP. It trades about 0.05 of its potential returns per unit of risk. SPDR SP Biotech is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 9,129 in SPDR SP Biotech on September 1, 2024 and sell it today you would earn a total of 833.00 from holding SPDR SP Biotech or generate 9.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Vanguard Health Care vs. SPDR SP Biotech
Performance |
| Timeline |
| Vanguard Health Care |
| SPDR SP Biotech |
Vanguard Health and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Health and SPDR SP
The main advantage of trading using opposite Vanguard Health and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Health 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 Health vs. Vanguard Consumer Staples | Vanguard Health vs. Vanguard Financials Index | Vanguard Health vs. Vanguard Information Technology | Vanguard Health vs. Vanguard Consumer Discretionary |
| SPDR SP vs. iShares Biotechnology ETF | SPDR SP vs. Health Care Select | SPDR SP vs. Technology Select Sector | SPDR SP vs. Industrial 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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