Correlation Between Vanguard FTSE and SPDR Portfolio

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

By analyzing existing cross correlation between Vanguard FTSE Europe and SPDR Portfolio Europe, you can compare the effects of market volatilities on Vanguard FTSE and SPDR Portfolio 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 SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and SPDR Portfolio.

Diversification Opportunities for Vanguard FTSE and SPDR Portfolio

0.85

Correlation Coefficient

Vanguard FTSE  SPDR Portfolio

Very poor diversification

The 3 months correlation between Vanguard and SPDR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Europe and SPDR Portfolio Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio Europe 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 Europe are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio Europe has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and SPDR Portfolio go up and down completely randomly.

Pair Corralation between Vanguard FTSE and SPDR Portfolio

Considering the 90-day investment horizon Vanguard FTSE Europe is expected to generate 1.0 times more return on investment than SPDR Portfolio. However, Vanguard FTSE is 1.0 times more volatile than SPDR Portfolio Europe. It trades about -0.14 of its potential returns per unit of risk. SPDR Portfolio Europe is currently generating about -0.15 per unit of risk. If you would invest  7,076  in Vanguard FTSE Europe on August 30, 2024 and sell it today you would lose (544.00) from holding Vanguard FTSE Europe or give up 7.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Vanguard FTSE Europe  vs.  SPDR Portfolio Europe

Vanguard FTSE Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Europe has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

SPDR Portfolio Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Portfolio Europe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Vanguard FTSE and SPDR Portfolio

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

The idea behind Vanguard FTSE Europe and SPDR Portfolio Europe 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.