Correlation Between SPDR Series and Vanguard Index
Can any of the company-specific risk be diversified away by investing in both SPDR Series and Vanguard Index 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 Series and Vanguard Index into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Series Trust and Vanguard Index Funds, you can compare the effects of market volatilities on SPDR Series and Vanguard Index 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 Series with a short position of Vanguard Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Series and Vanguard Index.
Diversification Opportunities for SPDR Series and Vanguard Index
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Series Trust and Vanguard Index Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Index Funds and SPDR Series 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 Series Trust are associated (or correlated) with Vanguard Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Index Funds has no effect on the direction of SPDR Series i.e., SPDR Series and Vanguard Index go up and down completely randomly.
Pair Corralation between SPDR Series and Vanguard Index
Assuming the 90 days trading horizon SPDR Series is expected to generate 1.28 times less return on investment than Vanguard Index. In addition to that, SPDR Series is 1.75 times more volatile than Vanguard Index Funds. It trades about 0.05 of its total potential returns per unit of risk. Vanguard Index Funds is currently generating about 0.11 per unit of volatility. If you would invest 702,638 in Vanguard Index Funds on August 27, 2024 and sell it today you would earn a total of 418,862 from holding Vanguard Index Funds or generate 59.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.78% |
| Values | Daily Returns |
SPDR Series Trust vs. Vanguard Index Funds
Performance |
| Timeline |
| SPDR Series Trust |
| Vanguard Index Funds |
SPDR Series and Vanguard Index Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Series and Vanguard Index
The main advantage of trading using opposite SPDR Series and Vanguard Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Series position performs unexpectedly, Vanguard Index 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 Index will offset losses from the drop in Vanguard Index's long position.| SPDR Series vs. Vanguard Index Funds | SPDR Series vs. Vanguard Index Funds | SPDR Series vs. Vanguard Tax Managed Funds | SPDR Series vs. Vanguard International Equity |
| Vanguard Index vs. Vanguard Funds Public | Vanguard Index vs. Vanguard Specialized Funds | Vanguard Index vs. Vanguard World | Vanguard Index vs. Vanguard Index Funds |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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