Correlation Between SPDR Barclays and Vanguard Extended

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

By analyzing existing cross correlation between SPDR Barclays Long and Vanguard Extended Duration, you can compare the effects of market volatilities on SPDR Barclays and Vanguard Extended 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 Barclays with a short position of Vanguard Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Barclays and Vanguard Extended.

Diversification Opportunities for SPDR Barclays and Vanguard Extended

1.0

Correlation Coefficient

SPDR Barclays  Vanguard Extended

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 Barclays Long and Vanguard Extended Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended and SPDR Barclays 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 Barclays Long are associated (or correlated) with Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended has no effect on the direction of SPDR Barclays i.e., SPDR Barclays and Vanguard Extended go up and down completely randomly.

Pair Corralation between SPDR Barclays and Vanguard Extended

Given the investment horizon of 90 days SPDR Barclays Long is expected to generate 0.62 times more return on investment than Vanguard Extended. However, SPDR Barclays Long is 1.61 times less risky than Vanguard Extended. It trades about -0.06 of its potential returns per unit of risk. Vanguard Extended Duration is currently generating about -0.05 per unit of risk. If you would invest  2,873  in SPDR Barclays Long on September 2, 2024 and sell it today you would lose (86.00) from holding SPDR Barclays Long or give up 2.99% of portfolio value over 90 days.

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

SPDR Barclays Long  vs.  Vanguard Extended Duration

SPDR Barclays Long

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Barclays Long has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, SPDR Barclays is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Vanguard Extended

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Extended Duration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Vanguard Extended is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SPDR Barclays and Vanguard Extended

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

The idea behind SPDR Barclays Long and Vanguard Extended Duration 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.