Correlation Between Vanguard USD and SPDR BB

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

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

Diversification Opportunities for Vanguard USD and SPDR BB

-0.33

Correlation Coefficient

Vanguard USD  SPDR BB

Very good diversification

The 3 months correlation between Vanguard and SPDR is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard USD Treasury and SPDR BB SB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR BB SB and Vanguard USD 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 USD Treasury are associated (or correlated) with SPDR BB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR BB SB has no effect on the direction of Vanguard USD i.e., Vanguard USD and SPDR BB go up and down completely randomly.

Pair Corralation between Vanguard USD and SPDR BB

Assuming the 90 days trading horizon Vanguard USD Treasury is expected to generate 0.99 times more return on investment than SPDR BB. However, Vanguard USD Treasury is 1.01 times less risky than SPDR BB. It trades about 0.15 of its potential returns per unit of risk. SPDR BB SB is currently generating about -0.16 per unit of risk. If you would invest  1,982  in Vanguard USD Treasury on September 23, 2024 and sell it today you would earn a total of  72.00  from holding Vanguard USD Treasury or generate 3.63% return on investment over 90 days.

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

Vanguard USD Treasury  vs.  SPDR BB SB

Vanguard USD Treasury

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard USD Treasury are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vanguard USD is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR BB SB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR BB SB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SPDR BB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard USD and SPDR BB

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

The idea behind Vanguard USD Treasury and SPDR BB SB 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.