Correlation Between Vanguard Growth and SPDR Dow

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

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

Diversification Opportunities for Vanguard Growth and SPDR Dow

-0.68

Correlation Coefficient

Vanguard Growth  SPDR Dow

Excellent diversification

The 3 months correlation between Vanguard and SPDR is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and SPDR Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Dow Jones and Vanguard Growth 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 Growth Index are associated (or correlated) with SPDR Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Dow Jones has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and SPDR Dow go up and down completely randomly.

Pair Corralation between Vanguard Growth and SPDR Dow

Considering the 90-day investment horizon Vanguard Growth Index is expected to generate 1.25 times more return on investment than SPDR Dow. However, Vanguard Growth is 1.25 times more volatile than SPDR Dow Jones. It trades about 0.23 of its potential returns per unit of risk. SPDR Dow Jones is currently generating about -0.14 per unit of risk. If you would invest  37,521  in Vanguard Growth Index on September 13, 2024 and sell it today you would earn a total of  5,170  from holding Vanguard Growth Index or generate 13.78% return on investment over 90 days.

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

Vanguard Growth Index  vs.  SPDR Dow Jones

Vanguard Growth Index

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth Index are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Vanguard Growth reported solid returns over the last few months and may actually be approaching a breakup point.

SPDR Dow Jones

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Dow Jones has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Vanguard Growth and SPDR Dow

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

The idea behind Vanguard Growth Index and SPDR Dow Jones 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.