Correlation Between SPDR Portfolio and Vanguard Total

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Can any of the company-specific risk be diversified away by investing in both SPDR Portfolio and Vanguard Total 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 Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Portfolio Aggregate and Vanguard Total Bond, you can compare the effects of market volatilities on SPDR Portfolio and Vanguard Total 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 Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and Vanguard Total.

Diversification Opportunities for SPDR Portfolio and Vanguard Total

1.0
  Correlation Coefficient

No risk reduction

The 3 months correlation between SPDR and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio Aggregate and Vanguard Total Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Bond 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 Aggregate are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Bond has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and Vanguard Total go up and down completely randomly.

Pair Corralation between SPDR Portfolio and Vanguard Total

Given the investment horizon of 90 days SPDR Portfolio Aggregate is expected to under-perform the Vanguard Total. But the etf apears to be less risky and, when comparing its historical volatility, SPDR Portfolio Aggregate is 1.02 times less risky than Vanguard Total. The etf trades about -0.02 of its potential returns per unit of risk. The Vanguard Total Bond is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  7,495  in Vanguard Total Bond on December 20, 2023 and sell it today you would lose (302.00) from holding Vanguard Total Bond or give up 4.03% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

SPDR Portfolio Aggregate  vs.  Vanguard Total Bond

 Performance 
       Timeline  
SPDR Portfolio Aggregate 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days SPDR Portfolio Aggregate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SPDR Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Vanguard Total Bond 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Vanguard Total Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

SPDR Portfolio and Vanguard Total Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SPDR Portfolio and Vanguard Total

The main advantage of trading using opposite SPDR Portfolio and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Portfolio position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.
The idea behind SPDR Portfolio Aggregate and Vanguard Total Bond pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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