Correlation Between Vanguard FTSE and SSgA SPDR

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Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and SSgA SPDR 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 SSgA SPDR 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 SSgA SPDR ETFs, you can compare the effects of market volatilities on Vanguard FTSE and SSgA SPDR 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 SSgA SPDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and SSgA SPDR.

Diversification Opportunities for Vanguard FTSE and SSgA SPDR

-0.4
  Correlation Coefficient

Very good diversification

The 3 months correlation between Vanguard and SSgA is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and SSgA SPDR ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR ETFs 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 SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR ETFs has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and SSgA SPDR go up and down completely randomly.

Pair Corralation between Vanguard FTSE and SSgA SPDR

Considering the 90-day investment horizon Vanguard FTSE is expected to generate 1.76 times less return on investment than SSgA SPDR. But when comparing it to its historical volatility, Vanguard FTSE Developed is 1.63 times less risky than SSgA SPDR. It trades about 0.04 of its potential returns per unit of risk. SSgA SPDR ETFs is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,362  in SSgA SPDR ETFs on September 30, 2024 and sell it today you would earn a total of  1,061  from holding SSgA SPDR ETFs or generate 19.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy98.93%
ValuesDaily Returns

Vanguard FTSE Developed  vs.  SSgA SPDR ETFs

 Performance 
       Timeline  
Vanguard FTSE Developed 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest unfluctuating performance, the Etf's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.
SSgA SPDR ETFs 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
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 FTSE and SSgA SPDR Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard FTSE and SSgA SPDR

The main advantage of trading using opposite Vanguard FTSE and SSgA SPDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, SSgA SPDR 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 SSgA SPDR will offset losses from the drop in SSgA SPDR's long position.
The idea behind Vanguard FTSE Developed and SSgA SPDR ETFs 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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