Correlation Between Vanguard and SPDR Kensho

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

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

Diversification Opportunities for Vanguard and SPDR Kensho

0.96

Correlation Coefficient

Vanguard  SPDR Kensho

Almost no diversification

The 3 months correlation between Vanguard and SPDR is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Mid Cap and SPDR Kensho New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Kensho New and Vanguard 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 SP Mid Cap are associated (or correlated) with SPDR Kensho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Kensho New has no effect on the direction of Vanguard i.e., Vanguard and SPDR Kensho go up and down completely randomly.

Pair Corralation between Vanguard and SPDR Kensho

Given the investment horizon of 90 days Vanguard SP Mid Cap is expected to under-perform the SPDR Kensho. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard SP Mid Cap is 1.21 times less risky than SPDR Kensho. The etf trades about -0.11 of its potential returns per unit of risk. The SPDR Kensho New is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  5,100  in SPDR Kensho New on December 28, 2024 and sell it today you would lose (412.00) from holding SPDR Kensho New or give up 8.08% of portfolio value over 90 days.

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

Vanguard SP Mid Cap  vs.  SPDR Kensho New

Vanguard SP Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP Mid Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

SPDR Kensho New

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Kensho New has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Etf's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with Vanguard and SPDR Kensho

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

The idea behind Vanguard SP Mid Cap and SPDR Kensho New 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.