Correlation Between Vanguard Total and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and SPDR MSCI 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 Total and SPDR MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total World and SPDR MSCI World, you can compare the effects of market volatilities on Vanguard Total and SPDR MSCI 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 Total with a short position of SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and SPDR MSCI.
Diversification Opportunities for Vanguard Total and SPDR MSCI
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and SPDR is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total World and SPDR MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI World and Vanguard Total 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 Total World are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI World has no effect on the direction of Vanguard Total i.e., Vanguard Total and SPDR MSCI go up and down completely randomly.
Pair Corralation between Vanguard Total and SPDR MSCI
Allowing for the 90-day total investment horizon Vanguard Total World is expected to generate 1.23 times more return on investment than SPDR MSCI. However, Vanguard Total is 1.23 times more volatile than SPDR MSCI World. It trades about 0.13 of its potential returns per unit of risk. SPDR MSCI World is currently generating about 0.14 per unit of risk. If you would invest 9,633 in Vanguard Total World on August 25, 2024 and sell it today you would earn a total of 2,426 from holding Vanguard Total World or generate 25.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total World vs. SPDR MSCI World
Performance |
| Timeline |
| Vanguard Total World |
| SPDR MSCI World |
Vanguard Total and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and SPDR MSCI
The main advantage of trading using opposite Vanguard Total and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, SPDR MSCI 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 MSCI will offset losses from the drop in SPDR MSCI's long position.| Vanguard Total vs. iShares MSCI Emerging | Vanguard Total vs. BMO Long Federal | Vanguard Total vs. iShares MSCI EAFE | Vanguard Total vs. Vanguard Total Market |
| SPDR MSCI vs. iShares MSCI Emerging | SPDR MSCI vs. BMO Long Federal | SPDR MSCI vs. iShares MSCI EAFE | SPDR MSCI vs. Vanguard Total Market |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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