Correlation Between Vanguard Funds and SPDR SP

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

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

Diversification Opportunities for Vanguard Funds and SPDR SP

0.81

Correlation Coefficient

Vanguard Funds  SPDR SP

Very poor diversification

The 3 months correlation between Vanguard and SPDR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Funds Public and SPDR SP Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Materials and Vanguard Funds 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 Funds Public are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Materials has no effect on the direction of Vanguard Funds i.e., Vanguard Funds and SPDR SP go up and down completely randomly.

Pair Corralation between Vanguard Funds and SPDR SP

Assuming the 90 days trading horizon Vanguard Funds Public is expected to generate 1.04 times more return on investment than SPDR SP. However, Vanguard Funds is 1.04 times more volatile than SPDR SP Materials. It trades about 0.24 of its potential returns per unit of risk. SPDR SP Materials is currently generating about 0.15 per unit of risk. If you would invest  9,460  in Vanguard Funds Public on September 4, 2024 and sell it today you would earn a total of  1,380  from holding Vanguard Funds Public or generate 14.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Vanguard Funds Public  vs.  SPDR SP Materials

Vanguard Funds Public

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Funds Public are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Vanguard Funds reported solid returns over the last few months and may actually be approaching a breakup point.

SPDR SP Materials

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Materials are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Funds and SPDR SP

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

The idea behind Vanguard Funds Public and SPDR SP Materials 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.