Correlation Between SPDR SSGA and VSDM

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

By analyzing existing cross correlation between SPDR SSGA My2028 and VSDM, you can compare the effects of market volatilities on SPDR SSGA and VSDM 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 SSGA with a short position of VSDM. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SSGA and VSDM.

Diversification Opportunities for SPDR SSGA and VSDM

0.91

Correlation Coefficient

SPDR SSGA  VSDM

Almost no diversification

The 3 months correlation between SPDR and VSDM is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SSGA My2028 and VSDM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VSDM and SPDR SSGA 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 SSGA My2028 are associated (or correlated) with VSDM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VSDM has no effect on the direction of SPDR SSGA i.e., SPDR SSGA and VSDM go up and down completely randomly.

Pair Corralation between SPDR SSGA and VSDM

Given the investment horizon of 90 days SPDR SSGA is expected to generate 3.71 times less return on investment than VSDM. In addition to that, SPDR SSGA is 1.16 times more volatile than VSDM. It trades about 0.03 of its total potential returns per unit of risk. VSDM is currently generating about 0.13 per unit of volatility. If you would invest  7,460  in VSDM on December 17, 2024 and sell it today you would earn a total of  71.00  from holding VSDM or generate 0.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

SPDR SSGA My2028  vs.  VSDM

SPDR SSGA My2028

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSGA My2028 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, SPDR SSGA is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

VSDM

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VSDM are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, VSDM is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SPDR SSGA and VSDM

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

The idea behind SPDR SSGA My2028 and VSDM 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 Transaction History module to view history of all your transactions and understand their impact on performance.