Correlation Between Vanguard Mid and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Vanguard Mid 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 Mid 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 Mid Cap Value and SPDR SP 400, you can compare the effects of market volatilities on Vanguard Mid 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 Mid with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid and SPDR SP.
Diversification Opportunities for Vanguard Mid and SPDR SP
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and SPDR is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Value and SPDR SP 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 400 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 Value 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 400 has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and SPDR SP go up and down completely randomly.
Pair Corralation between Vanguard Mid and SPDR SP
Considering the 90-day investment horizon Vanguard Mid is expected to generate 1.03 times less return on investment than SPDR SP. But when comparing it to its historical volatility, Vanguard Mid Cap Value is 1.37 times less risky than SPDR SP. It trades about 0.1 of its potential returns per unit of risk. SPDR SP 400 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 6,699 in SPDR SP 400 on August 28, 2024 and sell it today you would earn a total of 2,018 from holding SPDR SP 400 or generate 30.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Mid Cap Value vs. SPDR SP 400
Performance |
| Timeline |
| Vanguard Mid Cap |
| SPDR SP 400 |
Vanguard Mid and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Mid and SPDR SP
The main advantage of trading using opposite Vanguard Mid and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid 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 Mid vs. Vanguard Small Cap Value | Vanguard Mid vs. Vanguard Mid Cap Growth | Vanguard Mid vs. Vanguard Value Index | Vanguard Mid vs. Vanguard Small Cap Growth |
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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