Correlation Between Vanguard and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Vanguard 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 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 SP Small Cap and SPDR SP 600, you can compare the effects of market volatilities on Vanguard 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 with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and SPDR SP.
Diversification Opportunities for Vanguard and SPDR SP
No risk reduction
The 3 months correlation between Vanguard and SPDR is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Small Cap and SPDR SP 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 600 and Vanguard 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 SP Small Cap 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 600 has no effect on the direction of Vanguard i.e., Vanguard and SPDR SP go up and down completely randomly.
Pair Corralation between Vanguard and SPDR SP
Given the investment horizon of 90 days Vanguard SP Small Cap is expected to generate 1.03 times more return on investment than SPDR SP. However, Vanguard is 1.03 times more volatile than SPDR SP 600. It trades about 0.22 of its potential returns per unit of risk. SPDR SP 600 is currently generating about 0.23 per unit of risk. If you would invest 11,833 in Vanguard SP Small Cap on August 28, 2024 and sell it today you would earn a total of 993.00 from holding Vanguard SP Small Cap or generate 8.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard SP Small Cap vs. SPDR SP 600
Performance |
| Timeline |
| Vanguard SP Small |
| SPDR SP 600 |
Vanguard and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and SPDR SP
The main advantage of trading using opposite Vanguard and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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 vs. Vanguard SP Small Cap | Vanguard vs. Vanguard SP Mid Cap | Vanguard vs. Vanguard Russell 2000 | Vanguard vs. Vanguard SP Small Cap |
| SPDR SP vs. Invesco DWA Momentum | SPDR SP vs. Invesco DWA Developed | SPDR SP vs. Invesco DWA Emerging | SPDR SP vs. First Trust Small |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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