Correlation Between Vanguard Total and SPDR Barclays

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

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

Diversification Opportunities for Vanguard Total and SPDR Barclays

0.57

Correlation Coefficient

Vanguard Total  SPDR Barclays

Very weak diversification

The 3 months correlation between Vanguard and SPDR is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and SPDR Barclays Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays Short and Vanguard Total 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 Total Bond are associated (or correlated) with SPDR Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays Short has no effect on the direction of Vanguard Total i.e., Vanguard Total and SPDR Barclays go up and down completely randomly.

Pair Corralation between Vanguard Total and SPDR Barclays

Considering the 90-day investment horizon Vanguard Total Bond is expected to generate about the same return on investment as SPDR Barclays Short. However, Vanguard Total is 4.1 times more volatile than SPDR Barclays Short. It trades about 0.09 of its potential returns per unit of risk. SPDR Barclays Short is currently producing about 0.39 per unit of risk. If you would invest  2,977  in SPDR Barclays Short on September 15, 2024 and sell it today you would earn a total of  18.00  from holding SPDR Barclays Short or generate 0.6% return on investment over 90 days.

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

Vanguard Total Bond  vs.  SPDR Barclays Short

Vanguard Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

SPDR Barclays Short

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Barclays Short are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SPDR Barclays is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Total and SPDR Barclays

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

The idea behind Vanguard Total Bond and SPDR Barclays Short 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.