Correlation Between SSgA SPDR and Vanguard Total

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

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

Diversification Opportunities for SSgA SPDR and Vanguard Total

0.87

Correlation Coefficient

SSgA SPDR  Vanguard Total

Very poor diversification

The 3 months correlation between SSgA and Vanguard is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding SSgA SPDR ETFs and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock and SSgA SPDR 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 SSgA SPDR ETFs 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 Stock has no effect on the direction of SSgA SPDR i.e., SSgA SPDR and Vanguard Total go up and down completely randomly.

Pair Corralation between SSgA SPDR and Vanguard Total

Assuming the 90 days horizon SSgA SPDR is expected to generate 1.48 times less return on investment than Vanguard Total. In addition to that, SSgA SPDR is 1.48 times more volatile than Vanguard Total Stock. It trades about 0.05 of its total potential returns per unit of risk. Vanguard Total Stock is currently generating about 0.11 per unit of volatility. If you would invest  21,438  in Vanguard Total Stock on September 30, 2024 and sell it today you would earn a total of  7,969  from holding Vanguard Total Stock or generate 37.17% return on investment over 90 days.

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

SSgA SPDR ETFs  vs.  Vanguard Total Stock

SSgA SPDR ETFs

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SSgA SPDR ETFs are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SSgA SPDR is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Vanguard Total Stock

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SSgA SPDR and Vanguard Total

The main advantage of trading using opposite SSgA SPDR and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSgA SPDR 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 SSgA SPDR ETFs and Vanguard Total Stock 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.