Correlation Between SPDR SP and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Vanguard FTSE 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 FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP International and Vanguard FTSE All World, you can compare the effects of market volatilities on SPDR SP and Vanguard FTSE 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 FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Vanguard FTSE.
Diversification Opportunities for SPDR SP and Vanguard FTSE
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP International and Vanguard FTSE All World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE All 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 International are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE All has no effect on the direction of SPDR SP i.e., SPDR SP and Vanguard FTSE go up and down completely randomly.
Pair Corralation between SPDR SP and Vanguard FTSE
Considering the 90-day investment horizon SPDR SP International is expected to under-perform the Vanguard FTSE. In addition to that, SPDR SP is 1.11 times more volatile than Vanguard FTSE All World. It trades about -0.14 of its total potential returns per unit of risk. Vanguard FTSE All World is currently generating about -0.09 per unit of volatility. If you would invest 11,590 in Vanguard FTSE All World on January 24, 2024 and sell it today you would lose (159.00) from holding Vanguard FTSE All World or give up 1.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP International vs. Vanguard FTSE All World
Performance |
| Timeline |
| SPDR SP International |
| Vanguard FTSE All |
SPDR SP and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Vanguard FTSE
The main advantage of trading using opposite SPDR SP and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Vanguard FTSE 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 FTSE will offset losses from the drop in Vanguard FTSE's long position.| SPDR SP vs. Dimensional ETF Trust | SPDR SP vs. Vanguard Small Cap Index | SPDR SP vs. First Trust Multi Manager | SPDR SP vs. Vanguard SP Small Cap |
| Vanguard FTSE vs. Vanguard Global ex US | Vanguard FTSE vs. Vanguard FTSE All World | Vanguard FTSE vs. Vanguard Small Cap Value | Vanguard FTSE vs. Vanguard FTSE Pacific |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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