Correlation Between SPDR SPASX and Vanguard Australian

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

By analyzing existing cross correlation between SPDR SPASX 200 and Vanguard Australian Property, you can compare the effects of market volatilities on SPDR SPASX and Vanguard Australian 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 SPASX with a short position of Vanguard Australian. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SPASX and Vanguard Australian.

Diversification Opportunities for SPDR SPASX and Vanguard Australian

0.95

Correlation Coefficient

SPDR SPASX  Vanguard Australian

Almost no diversification

The 3 months correlation between SPDR and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SPASX 200 and Vanguard Australian Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Australian and SPDR SPASX 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 SPASX 200 are associated (or correlated) with Vanguard Australian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Australian has no effect on the direction of SPDR SPASX i.e., SPDR SPASX and Vanguard Australian go up and down completely randomly.

Pair Corralation between SPDR SPASX and Vanguard Australian

Assuming the 90 days trading horizon SPDR SPASX 200 is expected to generate 0.97 times more return on investment than Vanguard Australian. However, SPDR SPASX 200 is 1.04 times less risky than Vanguard Australian. It trades about 0.12 of its potential returns per unit of risk. Vanguard Australian Property is currently generating about 0.12 per unit of risk. If you would invest  1,308  in SPDR SPASX 200 on September 4, 2024 and sell it today you would earn a total of  104.00  from holding SPDR SPASX 200 or generate 7.95% return on investment over 90 days.

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

SPDR SPASX 200  vs.  Vanguard Australian Property

SPDR SPASX 200

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SPASX 200 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, SPDR SPASX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Australian

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Australian Property are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard Australian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPDR SPASX and Vanguard Australian

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

The idea behind SPDR SPASX 200 and Vanguard Australian Property 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.