Correlation Between Vanguard Growth and SPDR Dow
Can any of the company-specific risk be diversified away by investing in both Vanguard Growth and SPDR Dow 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 Growth and SPDR Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Growth Index and SPDR Dow Jones, you can compare the effects of market volatilities on Vanguard Growth and SPDR Dow 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 Growth with a short position of SPDR Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Growth and SPDR Dow.
Diversification Opportunities for Vanguard Growth and SPDR Dow
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and SPDR is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and SPDR Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Dow Jones and Vanguard Growth 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 Growth Index are associated (or correlated) with SPDR Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Dow Jones has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and SPDR Dow go up and down completely randomly.
Pair Corralation between Vanguard Growth and SPDR Dow
Considering the 90-day investment horizon Vanguard Growth is expected to generate 2.3 times less return on investment than SPDR Dow. In addition to that, Vanguard Growth is 1.21 times more volatile than SPDR Dow Jones. It trades about 0.1 of its total potential returns per unit of risk. SPDR Dow Jones is currently generating about 0.28 per unit of volatility. If you would invest 42,224 in SPDR Dow Jones on August 30, 2024 and sell it today you would earn a total of 2,550 from holding SPDR Dow Jones or generate 6.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Vanguard Growth Index vs. SPDR Dow Jones
Performance |
| Timeline |
| Vanguard Growth Index |
| SPDR Dow Jones |
Vanguard Growth and SPDR Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Growth and SPDR Dow
The main advantage of trading using opposite Vanguard Growth and SPDR Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Growth position performs unexpectedly, SPDR Dow 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 Dow will offset losses from the drop in SPDR Dow's long position.| Vanguard Growth vs. Vanguard Value Index | Vanguard Growth vs. Vanguard Information Technology | Vanguard Growth vs. Vanguard Small Cap Growth | Vanguard Growth vs. Vanguard Dividend Appreciation |
| SPDR Dow vs. iShares Russell 2000 | SPDR Dow vs. SPDR SP 500 | SPDR Dow vs. Financial Select Sector | SPDR Dow vs. Invesco QQQ Trust |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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