Correlation Between Vanguard Large and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both Vanguard Large 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 Large 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 Large Cap Index and SPDR MSCI USA, you can compare the effects of market volatilities on Vanguard Large 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 Large with a short position of SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Large and SPDR MSCI.
Diversification Opportunities for Vanguard Large and SPDR MSCI
0.97 | Correlation Coefficient |
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 Large Cap Index and SPDR MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI USA and Vanguard Large 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 Large Cap Index 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 USA has no effect on the direction of Vanguard Large i.e., Vanguard Large and SPDR MSCI go up and down completely randomly.
Pair Corralation between Vanguard Large and SPDR MSCI
Allowing for the 90-day total investment horizon Vanguard Large Cap Index is expected to generate 1.14 times more return on investment than SPDR MSCI. However, Vanguard Large is 1.14 times more volatile than SPDR MSCI USA. It trades about 0.16 of its potential returns per unit of risk. SPDR MSCI USA is currently generating about 0.15 per unit of risk. If you would invest 26,659 in Vanguard Large Cap Index on August 27, 2024 and sell it today you would earn a total of 768.00 from holding Vanguard Large Cap Index or generate 2.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Large Cap Index vs. SPDR MSCI USA
Performance |
| Timeline |
| Vanguard Large Cap |
| SPDR MSCI USA |
Vanguard Large and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Large and SPDR MSCI
The main advantage of trading using opposite Vanguard Large and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Large 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 Large vs. Vanguard Mid Cap Index | Vanguard Large vs. Vanguard Small Cap Index | Vanguard Large vs. Vanguard Extended Market | Vanguard Large vs. Vanguard Small Cap Growth |
| SPDR MSCI vs. SPDR SSGA Large | SPDR MSCI vs. SPDR MSCI EAFE | SPDR MSCI vs. SPDR MSCI Emerging | SPDR MSCI vs. SPDR Russell 1000 |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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