Correlation Between Vanguard Industrials and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Vanguard Industrials 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 Industrials 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 Industrials Index and SPDR SP Transportation, you can compare the effects of market volatilities on Vanguard Industrials 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 Industrials with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Industrials and SPDR SP.
Diversification Opportunities for Vanguard Industrials and SPDR SP
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and SPDR is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Industrials Index and SPDR SP Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Transportation and Vanguard Industrials 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 Industrials 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 Transportation has no effect on the direction of Vanguard Industrials i.e., Vanguard Industrials and SPDR SP go up and down completely randomly.
Pair Corralation between Vanguard Industrials and SPDR SP
Considering the 90-day investment horizon Vanguard Industrials Index is expected to generate 0.83 times more return on investment than SPDR SP. However, Vanguard Industrials Index is 1.21 times less risky than SPDR SP. It trades about -0.05 of its potential returns per unit of risk. SPDR SP Transportation is currently generating about -0.08 per unit of risk. If you would invest 26,649 in Vanguard Industrials Index on November 18, 2024 and sell it today you would lose (238.00) from holding Vanguard Industrials Index or give up 0.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Industrials Index vs. SPDR SP Transportation
Performance |
| Timeline |
| Vanguard Industrials |
| SPDR SP Transportation |
Vanguard Industrials and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Industrials and SPDR SP
The main advantage of trading using opposite Vanguard Industrials and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Industrials 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.The idea behind Vanguard Industrials Index and SPDR SP Transportation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| SPDR SP vs. First Trust Indxx | SPDR SP vs. Direxion Daily Industrials | SPDR SP vs. Themes Transatlantic Defense | SPDR SP vs. FlexShares STOXX Global |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |