Correlation Between Vanguard USD and SP 500
Can any of the company-specific risk be diversified away by investing in both Vanguard USD and SP 500 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 USD and SP 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard USD Corporate and SP 500 VIX, you can compare the effects of market volatilities on Vanguard USD and SP 500 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 USD with a short position of SP 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard USD and SP 500.
Diversification Opportunities for Vanguard USD and SP 500
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Vanguard and VILX is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard USD Corporate and SP 500 VIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP 500 VIX and Vanguard USD 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 USD Corporate are associated (or correlated) with SP 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP 500 VIX has no effect on the direction of Vanguard USD i.e., Vanguard USD and SP 500 go up and down completely randomly.
Pair Corralation between Vanguard USD and SP 500
Assuming the 90 days trading horizon Vanguard USD is expected to generate 4.17 times less return on investment than SP 500. But when comparing it to its historical volatility, Vanguard USD Corporate is 26.34 times less risky than SP 500. It trades about 0.23 of its potential returns per unit of risk. SP 500 VIX is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 160,538 in SP 500 VIX on October 9, 2024 and sell it today you would lose (7,414) from holding SP 500 VIX or give up 4.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard USD Corporate vs. SP 500 VIX
Performance |
| Timeline |
| Vanguard USD Corporate |
| SP 500 VIX |
Vanguard USD and SP 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard USD and SP 500
The main advantage of trading using opposite Vanguard USD and SP 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard USD position performs unexpectedly, SP 500 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 SP 500 will offset losses from the drop in SP 500's long position.| Vanguard USD vs. SP 500 VIX | Vanguard USD vs. WisdomTree Natural Gas | Vanguard USD vs. WisdomTree Natural Gas | Vanguard USD vs. Leverage Shares 2x |
| SP 500 vs. Vanguard FTSE Developed | SP 500 vs. Leverage Shares 2x | SP 500 vs. Amundi Index Solutions | SP 500 vs. Amundi Index Solutions |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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