Correlation Between SP 500 and Vanguard
Can any of the company-specific risk be diversified away by investing in both SP 500 and Vanguard 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 SP 500 and Vanguard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SP 500 VIX and Vanguard SP 500, you can compare the effects of market volatilities on SP 500 and Vanguard 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 SP 500 with a short position of Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and Vanguard.
Diversification Opportunities for SP 500 and Vanguard
Pay attention - limited upside
The 3 months correlation between VILX and Vanguard is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 VIX and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 and SP 500 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 SP 500 VIX are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of SP 500 i.e., SP 500 and Vanguard go up and down completely randomly.
Pair Corralation between SP 500 and Vanguard
Assuming the 90 days trading horizon SP 500 VIX is expected to generate 88.55 times more return on investment than Vanguard. However, SP 500 is 88.55 times more volatile than Vanguard SP 500. It trades about 0.06 of its potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.15 per unit of risk. If you would invest 233.00 in SP 500 VIX on September 14, 2024 and sell it today you would earn a total of 163,145 from holding SP 500 VIX or generate 70019.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
SP 500 VIX vs. Vanguard SP 500
Performance |
| Timeline |
| SP 500 VIX |
| Vanguard SP 500 |
SP 500 and Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SP 500 and Vanguard
The main advantage of trading using opposite SP 500 and Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP 500 position performs unexpectedly, Vanguard 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 Vanguard will offset losses from the drop in Vanguard's long position.| SP 500 vs. iShares MSCI Japan | SP 500 vs. Amundi EUR High | SP 500 vs. iShares JP Morgan | SP 500 vs. Xtrackers MSCI |
| Vanguard vs. Leverage Shares 3x | Vanguard vs. Leverage Shares 3x | Vanguard vs. SP 500 VIX | Vanguard vs. WisdomTree Natural Gas |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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