Correlation Between Vanguard Russell and SPDR Portfolio
Can any of the company-specific risk be diversified away by investing in both Vanguard Russell and SPDR Portfolio 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 Russell and SPDR Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Russell 2000 and SPDR Portfolio SP, you can compare the effects of market volatilities on Vanguard Russell and SPDR Portfolio 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 Russell with a short position of SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Russell and SPDR Portfolio.
Diversification Opportunities for Vanguard Russell and SPDR Portfolio
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and SPDR is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Russell 2000 and SPDR Portfolio SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio SP and Vanguard Russell 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 Russell 2000 are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio SP has no effect on the direction of Vanguard Russell i.e., Vanguard Russell and SPDR Portfolio go up and down completely randomly.
Pair Corralation between Vanguard Russell and SPDR Portfolio
Given the investment horizon of 90 days Vanguard Russell is expected to generate 1.01 times less return on investment than SPDR Portfolio. In addition to that, Vanguard Russell is 1.64 times more volatile than SPDR Portfolio SP. It trades about 0.09 of its total potential returns per unit of risk. SPDR Portfolio SP is currently generating about 0.14 per unit of volatility. If you would invest 3,508 in SPDR Portfolio SP on August 26, 2024 and sell it today you would earn a total of 1,165 from holding SPDR Portfolio SP or generate 33.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Russell 2000 vs. SPDR Portfolio SP
Performance |
| Timeline |
| Vanguard Russell 2000 |
| SPDR Portfolio SP |
Vanguard Russell and SPDR Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Russell and SPDR Portfolio
The main advantage of trading using opposite Vanguard Russell and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Russell position performs unexpectedly, SPDR Portfolio 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 Portfolio will offset losses from the drop in SPDR Portfolio's long position.The idea behind Vanguard Russell 2000 and SPDR Portfolio SP pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| SPDR Portfolio vs. Invesco SP 500 | SPDR Portfolio vs. iShares Core High | SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. Schwab Dividend Equity |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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