Correlation Between Vanguard USD and SSgA SPDR
Can any of the company-specific risk be diversified away by investing in both Vanguard USD and SSgA SPDR 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 USD and SSgA SPDR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard USD Treasury and SSgA SPDR ETFs, you can compare the effects of market volatilities on Vanguard USD and SSgA SPDR 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 USD with a short position of SSgA SPDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard USD and SSgA SPDR.
Diversification Opportunities for Vanguard USD and SSgA SPDR
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and SSgA is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard USD Treasury and SSgA SPDR ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR ETFs and Vanguard USD 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 USD Treasury are associated (or correlated) with SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR ETFs has no effect on the direction of Vanguard USD i.e., Vanguard USD and SSgA SPDR go up and down completely randomly.
Pair Corralation between Vanguard USD and SSgA SPDR
Assuming the 90 days trading horizon Vanguard USD is expected to generate 7.93 times less return on investment than SSgA SPDR. But when comparing it to its historical volatility, Vanguard USD Treasury is 2.75 times less risky than SSgA SPDR. It trades about 0.09 of its potential returns per unit of risk. SSgA SPDR ETFs is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 4,893 in SSgA SPDR ETFs on November 2, 2024 and sell it today you would earn a total of 1,760 from holding SSgA SPDR ETFs or generate 35.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard USD Treasury vs. SSgA SPDR ETFs
Performance |
| Timeline |
| Vanguard USD Treasury |
| SSgA SPDR ETFs |
Vanguard USD and SSgA SPDR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard USD and SSgA SPDR
The main advantage of trading using opposite Vanguard USD and SSgA SPDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard USD position performs unexpectedly, SSgA SPDR 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 SSgA SPDR will offset losses from the drop in SSgA SPDR's long position.| Vanguard USD vs. Vanguard FTSE All World | Vanguard USD vs. Vanguard FTSE Developed | Vanguard USD vs. Vanguard FTSE All World | Vanguard USD vs. Vanguard FTSE Developed |
| SSgA SPDR vs. Vanguard SP 500 | SSgA SPDR vs. SPDR Dow Jones | SSgA SPDR vs. iShares Core MSCI | SSgA SPDR 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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