Correlation Between SPDR Portfolio and Vanguard Small
Can any of the company-specific risk be diversified away by investing in both SPDR Portfolio and Vanguard Small 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 Portfolio and Vanguard Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Portfolio SP and Vanguard Small Cap Index, you can compare the effects of market volatilities on SPDR Portfolio and Vanguard Small 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 Portfolio with a short position of Vanguard Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and Vanguard Small.
Diversification Opportunities for SPDR Portfolio and Vanguard Small
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 Portfolio SP and Vanguard Small Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and SPDR Portfolio 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 Portfolio SP are associated (or correlated) with Vanguard Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and Vanguard Small go up and down completely randomly.
Pair Corralation between SPDR Portfolio and Vanguard Small
Given the investment horizon of 90 days SPDR Portfolio is expected to generate 1.32 times less return on investment than Vanguard Small. In addition to that, SPDR Portfolio is 1.02 times more volatile than Vanguard Small Cap Index. It trades about 0.02 of its total potential returns per unit of risk. Vanguard Small Cap Index is currently generating about 0.03 per unit of volatility. If you would invest 18,964 in Vanguard Small Cap Index on January 25, 2024 and sell it today you would earn a total of 2,706 from holding Vanguard Small Cap Index or generate 14.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Portfolio SP vs. Vanguard Small Cap Index
Performance |
| Timeline |
| SPDR Portfolio SP |
| Vanguard Small Cap |
SPDR Portfolio and Vanguard Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Portfolio and Vanguard Small
The main advantage of trading using opposite SPDR Portfolio and Vanguard Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Portfolio position performs unexpectedly, Vanguard Small 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 Small will offset losses from the drop in Vanguard Small's long position.| SPDR Portfolio vs. First Trust RiverFront | SPDR Portfolio vs. First Trust RiverFront | SPDR Portfolio vs. Arrow DWA Tactical | SPDR Portfolio vs. First Trust Developed |
| Vanguard Small vs. First Trust RiverFront | Vanguard Small vs. First Trust RiverFront | Vanguard Small vs. Arrow DWA Tactical | Vanguard Small vs. First Trust Developed |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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