Correlation Between SPDR SP and Vanguard Consumer
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Vanguard Consumer 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 SPDR SP and Vanguard Consumer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Biotech and Vanguard Consumer Staples, you can compare the effects of market volatilities on SPDR SP and Vanguard Consumer 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 SPDR SP with a short position of Vanguard Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Vanguard Consumer.
Diversification Opportunities for SPDR SP and Vanguard Consumer
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between SPDR and Vanguard is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Biotech and Vanguard Consumer Staples in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Consumer Staples and SPDR SP 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 SPDR SP Biotech are associated (or correlated) with Vanguard Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Consumer Staples has no effect on the direction of SPDR SP i.e., SPDR SP and Vanguard Consumer go up and down completely randomly.
Pair Corralation between SPDR SP and Vanguard Consumer
Considering the 90-day investment horizon SPDR SP Biotech is expected to generate 2.61 times more return on investment than Vanguard Consumer. However, SPDR SP is 2.61 times more volatile than Vanguard Consumer Staples. It trades about 0.03 of its potential returns per unit of risk. Vanguard Consumer Staples is currently generating about 0.06 per unit of risk. If you would invest 8,269 in SPDR SP Biotech on September 12, 2024 and sell it today you would earn a total of 1,426 from holding SPDR SP Biotech or generate 17.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP Biotech vs. Vanguard Consumer Staples
Performance |
| Timeline |
| SPDR SP Biotech |
| Vanguard Consumer Staples |
SPDR SP and Vanguard Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Vanguard Consumer
The main advantage of trading using opposite SPDR SP and Vanguard Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Vanguard Consumer 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 Vanguard Consumer will offset losses from the drop in Vanguard Consumer's long position.| SPDR SP vs. iShares Biotechnology ETF | SPDR SP vs. Health Care Select | SPDR SP vs. Technology Select Sector | SPDR SP vs. Industrial Select Sector |
| Vanguard Consumer vs. Invesco SP 500 | Vanguard Consumer vs. Invesco SP 500 | Vanguard Consumer vs. Aquagold International | Vanguard Consumer vs. Morningstar Unconstrained Allocation |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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