Correlation Between Vanguard FTSE and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE 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 FTSE 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 FTSE Pacific and SPDR SP Aerospace, you can compare the effects of market volatilities on Vanguard FTSE 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 FTSE with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and SPDR SP.
Diversification Opportunities for Vanguard FTSE and SPDR SP
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and SPDR is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Pacific and SPDR SP Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Aerospace and Vanguard FTSE 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 FTSE Pacific 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 Aerospace has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and SPDR SP go up and down completely randomly.
Pair Corralation between Vanguard FTSE and SPDR SP
Considering the 90-day investment horizon Vanguard FTSE is expected to generate 5.58 times less return on investment than SPDR SP. But when comparing it to its historical volatility, Vanguard FTSE Pacific is 1.85 times less risky than SPDR SP. It trades about 0.11 of its potential returns per unit of risk. SPDR SP Aerospace is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 15,528 in SPDR SP Aerospace on September 4, 2024 and sell it today you would earn a total of 1,782 from holding SPDR SP Aerospace or generate 11.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Pacific vs. SPDR SP Aerospace
Performance |
| Timeline |
| Vanguard FTSE Pacific |
| SPDR SP Aerospace |
Vanguard FTSE and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and SPDR SP
The main advantage of trading using opposite Vanguard FTSE and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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 FTSE vs. iShares Core MSCI | Vanguard FTSE vs. Eaton Vance Enhanced | Vanguard FTSE vs. The Coca Cola | Vanguard FTSE vs. Pfizer Inc |
| SPDR SP vs. Invesco Aerospace Defense | SPDR SP vs. iShares Aerospace Defense | SPDR SP vs. SPDR SP Health | SPDR SP vs. SPDR SP Transportation |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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