Correlation Between Vanguard Total and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and SPDR SP 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 Vanguard Total and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Stock and SPDR SP 500, you can compare the effects of market volatilities on Vanguard Total and SPDR SP 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 Vanguard Total with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and SPDR SP.
Diversification Opportunities for Vanguard Total and SPDR SP
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and SPDR is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 and Vanguard Total 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 Vanguard Total Stock are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of Vanguard Total i.e., Vanguard Total and SPDR SP go up and down completely randomly.
Pair Corralation between Vanguard Total and SPDR SP
Considering the 90-day investment horizon Vanguard Total Stock is expected to under-perform the SPDR SP. In addition to that, Vanguard Total is 1.05 times more volatile than SPDR SP 500. It trades about -0.16 of its total potential returns per unit of risk. SPDR SP 500 is currently generating about -0.16 per unit of volatility. If you would invest 51,977 in SPDR SP 500 on January 25, 2024 and sell it today you would lose (1,436) from holding SPDR SP 500 or give up 2.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Vanguard Total Stock vs. SPDR SP 500
Performance |
| Timeline |
| Vanguard Total Stock |
| SPDR SP 500 |
Vanguard Total and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and SPDR SP
The main advantage of trading using opposite Vanguard Total and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.| Vanguard Total vs. SPDR MSCI EAFE | Vanguard Total vs. SPDR MSCI Emerging | Vanguard Total vs. SPDR Russell 1000 | Vanguard Total vs. SPDR Russell 1000 |
| SPDR SP vs. SPDR MSCI EAFE | SPDR SP vs. SPDR MSCI Emerging | SPDR SP vs. SPDR Russell 1000 | SPDR SP vs. SPDR Russell 1000 |
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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