Correlation Between Vident Core and SPDR Russell

Can any of the company-specific risk be diversified away by investing in both Vident Core and SPDR Russell 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 Vident Core and SPDR Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vident Core Equity and SPDR Russell 1000, you can compare the effects of market volatilities on Vident Core and SPDR Russell 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 Vident Core with a short position of SPDR Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vident Core and SPDR Russell.

Diversification Opportunities for Vident Core and SPDR Russell

0.88

Correlation Coefficient

Vident Core  SPDR Russell

Very poor diversification

The 3 months correlation between Vident and SPDR is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Vident Core Equity and SPDR Russell 1000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Russell 1000 and Vident Core 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 Vident Core Equity are associated (or correlated) with SPDR Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Russell 1000 has no effect on the direction of Vident Core i.e., Vident Core and SPDR Russell go up and down completely randomly.

Pair Corralation between Vident Core and SPDR Russell

Given the investment horizon of 90 days Vident Core Equity is expected to under-perform the SPDR Russell. But the etf apears to be less risky and, when comparing its historical volatility, Vident Core Equity is 1.07 times less risky than SPDR Russell. The etf trades about -0.3 of its potential returns per unit of risk. The SPDR Russell 1000 is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  12,188  in SPDR Russell 1000 on January 24, 2024 and sell it today you would lose (406.00) from holding SPDR Russell 1000 or give up 3.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Vident Core Equity  vs.  SPDR Russell 1000

Vident Core Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

SPDR Russell 1000

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Russell 1000 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, SPDR Russell is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Vident Core and SPDR Russell

The main advantage of trading using opposite Vident Core and SPDR Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vident Core position performs unexpectedly, SPDR Russell 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 Russell will offset losses from the drop in SPDR Russell's long position.

The idea behind Vident Core Equity and SPDR Russell 1000 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.