Correlation Between Vanguard Total and SPDR SPASX
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and SPDR SPASX 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 SPASX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Market and SPDR SPASX 200, you can compare the effects of market volatilities on Vanguard Total and SPDR SPASX 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 SPASX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and SPDR SPASX.
Diversification Opportunities for Vanguard Total and SPDR SPASX
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and SPDR is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Market and SPDR SPASX 200 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SPASX 200 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 Market are associated (or correlated) with SPDR SPASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SPASX 200 has no effect on the direction of Vanguard Total i.e., Vanguard Total and SPDR SPASX go up and down completely randomly.
Pair Corralation between Vanguard Total and SPDR SPASX
Assuming the 90 days trading horizon Vanguard Total Market is expected to generate 0.97 times more return on investment than SPDR SPASX. However, Vanguard Total Market is 1.03 times less risky than SPDR SPASX. It trades about 0.13 of its potential returns per unit of risk. SPDR SPASX 200 is currently generating about 0.09 per unit of risk. If you would invest 38,718 in Vanguard Total Market on September 1, 2024 and sell it today you would earn a total of 7,235 from holding Vanguard Total Market or generate 18.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.48% |
| Values | Daily Returns |
Vanguard Total Market vs. SPDR SPASX 200
Performance |
| Timeline |
| Vanguard Total Market |
| SPDR SPASX 200 |
Vanguard Total and SPDR SPASX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and SPDR SPASX
The main advantage of trading using opposite Vanguard Total and SPDR SPASX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, SPDR SPASX 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 SPASX will offset losses from the drop in SPDR SPASX's long position.| Vanguard Total vs. ETFS Morningstar Global | Vanguard Total vs. BetaShares Geared Equity | Vanguard Total vs. VanEck Vectors Australian | Vanguard Total vs. SPDR SPASX 200 |
| SPDR SPASX vs. BetaShares Global Government | SPDR SPASX vs. BetaShares Geared Australian | SPDR SPASX vs. BetaShares Australian Government | SPDR SPASX vs. BetaShares Global Robotics |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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