Correlation Between SPDR Russell and Vanguard Value

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

By analyzing existing cross correlation between SPDR Russell 1000 and Vanguard Value Factor, you can compare the effects of market volatilities on SPDR Russell and Vanguard Value 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 Russell with a short position of Vanguard Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Russell and Vanguard Value.

Diversification Opportunities for SPDR Russell and Vanguard Value

0.9

Correlation Coefficient

SPDR Russell  Vanguard Value

Almost no diversification

The 3 months correlation between SPDR and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Russell 1000 and Vanguard Value Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Value Factor and SPDR Russell 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 Russell 1000 are associated (or correlated) with Vanguard Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Value Factor has no effect on the direction of SPDR Russell i.e., SPDR Russell and Vanguard Value go up and down completely randomly.

Pair Corralation between SPDR Russell and Vanguard Value

Given the investment horizon of 90 days SPDR Russell 1000 is expected to generate 0.83 times more return on investment than Vanguard Value. However, SPDR Russell 1000 is 1.2 times less risky than Vanguard Value. It trades about -0.08 of its potential returns per unit of risk. Vanguard Value Factor is currently generating about -0.13 per unit of risk. If you would invest  11,644  in SPDR Russell 1000 on November 28, 2024 and sell it today you would lose (385.00) from holding SPDR Russell 1000 or give up 3.31% of portfolio value over 90 days.

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

SPDR Russell 1000  vs.  Vanguard Value Factor

SPDR Russell 1000

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Russell 1000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, SPDR Russell is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Value Factor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Value Factor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with SPDR Russell and Vanguard Value

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

The idea behind SPDR Russell 1000 and Vanguard Value Factor 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.