Correlation Between Vanguard and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both Vanguard 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 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 SP 500 and SPDR MSCI World, you can compare the effects of market volatilities on Vanguard 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 with a short position of SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and SPDR MSCI.
Diversification Opportunities for Vanguard and SPDR MSCI
Almost no diversification
The 3 months correlation between Vanguard and SPDR is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 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 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 SP 500 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 i.e., Vanguard and SPDR MSCI go up and down completely randomly.
Pair Corralation between Vanguard and SPDR MSCI
Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 1.06 times more return on investment than SPDR MSCI. However, Vanguard is 1.06 times more volatile than SPDR MSCI World. It trades about 0.25 of its potential returns per unit of risk. SPDR MSCI World is currently generating about 0.24 per unit of risk. If you would invest 10,195 in Vanguard SP 500 on August 25, 2024 and sell it today you would earn a total of 675.00 from holding Vanguard SP 500 or generate 6.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard SP 500 vs. SPDR MSCI World
Performance |
| Timeline |
| Vanguard SP 500 |
| SPDR MSCI World |
Vanguard and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and SPDR MSCI
The main advantage of trading using opposite Vanguard and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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 vs. SPDR Dow Jones | Vanguard vs. iShares Core MSCI | Vanguard vs. iShares SP 500 | Vanguard vs. Vanguard FTSE All World |
| SPDR MSCI vs. Vanguard SP 500 | SPDR MSCI vs. SPDR Dow Jones | SPDR MSCI vs. iShares Core MSCI | SPDR MSCI vs. iShares SP 500 |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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