Correlation Between SPDR SP and Vanguard Dividend

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

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

Diversification Opportunities for SPDR SP and Vanguard Dividend

0.63

Correlation Coefficient

SPDR SP  Vanguard Dividend

Poor diversification

The 3 months correlation between SPDR and Vanguard is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Dividend and Vanguard Dividend Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Dividend and SPDR SP 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 SP Dividend are associated (or correlated) with Vanguard Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Dividend has no effect on the direction of SPDR SP i.e., SPDR SP and Vanguard Dividend go up and down completely randomly.

Pair Corralation between SPDR SP and Vanguard Dividend

Considering the 90-day investment horizon SPDR SP Dividend is expected to under-perform the Vanguard Dividend. But the etf apears to be less risky and, when comparing its historical volatility, SPDR SP Dividend is 1.12 times less risky than Vanguard Dividend. The etf trades about -0.36 of its potential returns per unit of risk. The Vanguard Dividend Appreciation is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  20,020  in Vanguard Dividend Appreciation on October 12, 2024 and sell it today you would lose (439.00) from holding Vanguard Dividend Appreciation or give up 2.19% of portfolio value over 90 days.

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

SPDR SP Dividend  vs.  Vanguard Dividend Appreciation

SPDR SP Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Dividend Appreciation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Vanguard Dividend is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SPDR SP and Vanguard Dividend

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

The idea behind SPDR SP Dividend and Vanguard Dividend Appreciation 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.