Correlation Between SPDR SP and Vanguard Mega

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

By analyzing existing cross correlation between SPDR SP 500 and Vanguard Mega Cap, you can compare the effects of market volatilities on SPDR SP and Vanguard Mega 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 Mega. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Vanguard Mega.

Diversification Opportunities for SPDR SP and Vanguard Mega

0.99

Correlation Coefficient

SPDR SP  Vanguard Mega

No risk reduction

The 3 months correlation between SPDR and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Vanguard Mega Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mega Cap 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 500 are associated (or correlated) with Vanguard Mega. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mega Cap has no effect on the direction of SPDR SP i.e., SPDR SP and Vanguard Mega go up and down completely randomly.

Pair Corralation between SPDR SP and Vanguard Mega

Considering the 90-day investment horizon SPDR SP 500 is expected to under-perform the Vanguard Mega. But the etf apears to be less risky and, when comparing its historical volatility, SPDR SP 500 is 1.04 times less risky than Vanguard Mega. The etf trades about -0.04 of its potential returns per unit of risk. The Vanguard Mega Cap is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  21,400  in Vanguard Mega Cap on September 23, 2024 and sell it today you would earn a total of  115.00  from holding Vanguard Mega Cap or generate 0.54% return on investment over 90 days.

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

SPDR SP 500  vs.  Vanguard Mega Cap

SPDR SP 500

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Mega Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mega Cap are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Vanguard Mega is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR SP and Vanguard Mega

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

The idea behind SPDR SP 500 and Vanguard Mega Cap 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.