Correlation Between Vanguard Mid and SPDR Portfolio

Can any of the company-specific risk be diversified away by investing in both Vanguard Mid 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 Mid 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 Mid Cap Value and SPDR Portfolio SP, you can compare the effects of market volatilities on Vanguard Mid 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 Mid with a short position of SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid and SPDR Portfolio.

Diversification Opportunities for Vanguard Mid and SPDR Portfolio

0.94

Correlation Coefficient

Vanguard Mid  SPDR Portfolio

Almost no diversification

The 3 months correlation between Vanguard and SPDR is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Value and SPDR Portfolio SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio SP and Vanguard Mid 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 Mid Cap Value 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 SP has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and SPDR Portfolio go up and down completely randomly.

Pair Corralation between Vanguard Mid and SPDR Portfolio

Considering the 90-day investment horizon Vanguard Mid Cap Value is expected to generate 0.89 times more return on investment than SPDR Portfolio. However, Vanguard Mid Cap Value is 1.12 times less risky than SPDR Portfolio. It trades about 0.06 of its potential returns per unit of risk. SPDR Portfolio SP is currently generating about 0.04 per unit of risk. If you would invest  12,980  in Vanguard Mid Cap Value on September 22, 2024 and sell it today you would earn a total of  3,352  from holding Vanguard Mid Cap Value or generate 25.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Vanguard Mid Cap Value  vs.  SPDR Portfolio SP

Vanguard Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Mid Cap Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vanguard Mid is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

SPDR Portfolio SP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Portfolio SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPDR Portfolio is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard Mid and SPDR Portfolio

The main advantage of trading using opposite Vanguard Mid and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid 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 Mid Cap Value and SPDR Portfolio SP 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.