Correlation Between SPDR Kensho and Vanguard Mid

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

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

Diversification Opportunities for SPDR Kensho and Vanguard Mid

0.78

Correlation Coefficient

SPDR Kensho  Vanguard Mid

Poor diversification

The 3 months correlation between SPDR and Vanguard is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Kensho New and Vanguard Mid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap and SPDR Kensho 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 SPDR Kensho New are associated (or correlated) with Vanguard Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid Cap has no effect on the direction of SPDR Kensho i.e., SPDR Kensho and Vanguard Mid go up and down completely randomly.

Pair Corralation between SPDR Kensho and Vanguard Mid

Given the investment horizon of 90 days SPDR Kensho New is expected to under-perform the Vanguard Mid. In addition to that, SPDR Kensho is 1.24 times more volatile than Vanguard Mid Cap Growth. It trades about -0.07 of its total potential returns per unit of risk. Vanguard Mid Cap Growth is currently generating about -0.07 per unit of volatility. If you would invest  27,044  in Vanguard Mid Cap Growth on November 28, 2024 and sell it today you would lose (1,233) from holding Vanguard Mid Cap Growth or give up 4.56% of portfolio value over 90 days.

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

SPDR Kensho New  vs.  Vanguard Mid Cap Growth

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 relatively invariable primary indicators, SPDR Kensho is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Vanguard Mid Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SPDR Kensho and Vanguard Mid

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

The idea behind SPDR Kensho New and Vanguard Mid Cap Growth 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.