Correlation Between SPDR SP and Vanguard Materials
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Vanguard Materials 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 Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Metals and Vanguard Materials Index, you can compare the effects of market volatilities on SPDR SP and Vanguard Materials 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 Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Vanguard Materials.
Diversification Opportunities for SPDR SP and Vanguard Materials
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPDR and Vanguard is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Metals and Vanguard Materials Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Materials Index 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 Metals are associated (or correlated) with Vanguard Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Materials Index has no effect on the direction of SPDR SP i.e., SPDR SP and Vanguard Materials go up and down completely randomly.
Pair Corralation between SPDR SP and Vanguard Materials
Considering the 90-day investment horizon SPDR SP Metals is expected to generate 2.44 times more return on investment than Vanguard Materials. However, SPDR SP is 2.44 times more volatile than Vanguard Materials Index. It trades about 0.13 of its potential returns per unit of risk. Vanguard Materials Index is currently generating about -0.03 per unit of risk. If you would invest 6,469 in SPDR SP Metals on August 24, 2024 and sell it today you would earn a total of 379.00 from holding SPDR SP Metals or generate 5.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP Metals vs. Vanguard Materials Index
Performance |
| Timeline |
| SPDR SP Metals |
| Vanguard Materials Index |
SPDR SP and Vanguard Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Vanguard Materials
The main advantage of trading using opposite SPDR SP and Vanguard Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Vanguard Materials 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 Materials will offset losses from the drop in Vanguard Materials' long position.| SPDR SP vs. Sprott Nickel Miners | SPDR SP vs. Sprott Uranium Miners | SPDR SP vs. Aquagold International | SPDR SP vs. Morningstar Unconstrained Allocation |
| Vanguard Materials vs. Sprott Nickel Miners | Vanguard Materials vs. Sprott Uranium Miners | Vanguard Materials vs. Aquagold International | Vanguard Materials 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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