Correlation Between Vanguard Mid and SPDR SSGA
Can any of the company-specific risk be diversified away by investing in both Vanguard Mid and SPDR SSGA 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 Mid and SPDR SSGA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Mid Cap Index and SPDR SSGA Small, you can compare the effects of market volatilities on Vanguard Mid and SPDR SSGA 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 Mid with a short position of SPDR SSGA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid and SPDR SSGA.
Diversification Opportunities for Vanguard Mid and SPDR SSGA
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and SPDR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and SPDR SSGA Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA Small and Vanguard Mid 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 Mid Cap Index are associated (or correlated) with SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA Small has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and SPDR SSGA go up and down completely randomly.
Pair Corralation between Vanguard Mid and SPDR SSGA
Allowing for the 90-day total investment horizon Vanguard Mid is expected to generate 1.6 times less return on investment than SPDR SSGA. But when comparing it to its historical volatility, Vanguard Mid Cap Index is 2.66 times less risky than SPDR SSGA. It trades about 0.34 of its potential returns per unit of risk. SPDR SSGA Small is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 12,676 in SPDR SSGA Small on August 28, 2024 and sell it today you would earn a total of 1,288 from holding SPDR SSGA Small or generate 10.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Mid Cap Index vs. SPDR SSGA Small
Performance |
| Timeline |
| Vanguard Mid Cap |
| SPDR SSGA Small |
Vanguard Mid and SPDR SSGA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Mid and SPDR SSGA
The main advantage of trading using opposite Vanguard Mid and SPDR SSGA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid position performs unexpectedly, SPDR SSGA 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 SSGA will offset losses from the drop in SPDR SSGA's long position.| Vanguard Mid vs. Vanguard Small Cap Index | Vanguard Mid vs. Vanguard Large Cap Index | Vanguard Mid vs. Vanguard Small Cap Growth | Vanguard Mid vs. Vanguard Small Cap Value |
| SPDR SSGA vs. SPDR SSGA Large | SPDR SSGA vs. Invesco SP SmallCap | SPDR SSGA vs. Invesco SP MidCap | SPDR SSGA vs. SPDR MSCI EAFE |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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