Correlation Between Vanguard FTSE and Spinnaker ETF

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

By analyzing existing cross correlation between Vanguard FTSE Developed and Spinnaker ETF Series, you can compare the effects of market volatilities on Vanguard FTSE and Spinnaker ETF 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 FTSE with a short position of Spinnaker ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Spinnaker ETF.

Diversification Opportunities for Vanguard FTSE and Spinnaker ETF

-0.63

Correlation Coefficient

Vanguard FTSE  Spinnaker ETF

Excellent diversification

The 3 months correlation between Vanguard and Spinnaker is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and Spinnaker ETF Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spinnaker ETF Series and Vanguard FTSE 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 FTSE Developed are associated (or correlated) with Spinnaker ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spinnaker ETF Series has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Spinnaker ETF go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Spinnaker ETF

Considering the 90-day investment horizon Vanguard FTSE Developed is expected to generate 7.84 times more return on investment than Spinnaker ETF. However, Vanguard FTSE is 7.84 times more volatile than Spinnaker ETF Series. It trades about 0.04 of its potential returns per unit of risk. Spinnaker ETF Series is currently generating about 0.23 per unit of risk. If you would invest  5,028  in Vanguard FTSE Developed on September 5, 2024 and sell it today you would earn a total of  28.00  from holding Vanguard FTSE Developed or generate 0.56% return on investment over 90 days.

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

Vanguard FTSE Developed  vs.  Spinnaker ETF Series

Vanguard FTSE Developed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Developed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Vanguard FTSE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Spinnaker ETF Series

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Spinnaker ETF Series are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Spinnaker ETF is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vanguard FTSE and Spinnaker ETF

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

The idea behind Vanguard FTSE Developed and Spinnaker ETF Series 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.

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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.