Correlation Between Vanguard Index and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Vanguard Index 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 Index 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 Index Funds and SPDR SP 500, you can compare the effects of market volatilities on Vanguard Index 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 Index with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Index and SPDR SP.
Diversification Opportunities for Vanguard Index and SPDR SP
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and SPDR is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Index Funds and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 and Vanguard Index 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 Index Funds 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 500 has no effect on the direction of Vanguard Index i.e., Vanguard Index and SPDR SP go up and down completely randomly.
Pair Corralation between Vanguard Index and SPDR SP
Assuming the 90 days trading horizon Vanguard Index Funds is expected to generate 1.14 times more return on investment than SPDR SP. However, Vanguard Index is 1.14 times more volatile than SPDR SP 500. It trades about 0.17 of its potential returns per unit of risk. SPDR SP 500 is currently generating about 0.19 per unit of risk. If you would invest 371,544 in Vanguard Index Funds on August 29, 2024 and sell it today you would earn a total of 248,056 from holding Vanguard Index Funds or generate 66.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Index Funds vs. SPDR SP 500
Performance |
| Timeline |
| Vanguard Index Funds |
| SPDR SP 500 |
Vanguard Index and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Index and SPDR SP
The main advantage of trading using opposite Vanguard Index and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Index 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 Index vs. Vanguard Funds Public | Vanguard Index vs. Vanguard Specialized Funds | Vanguard Index vs. Vanguard World | Vanguard Index vs. Vanguard Index Funds |
| SPDR SP vs. SPDR Dow Jones | SPDR SP vs. SPDR Gold Trust | SPDR SP vs. SPDR Series Trust | SPDR SP vs. SPDR SP Regional |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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