Correlation Between SPDR SP and Vanguard Intermediate

Can any of the company-specific risk be diversified away by investing in both SPDR SP and Vanguard Intermediate 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 Intermediate 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 Intermediate Term Corporate, you can compare the effects of market volatilities on SPDR SP and Vanguard Intermediate 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 Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Vanguard Intermediate.

Diversification Opportunities for SPDR SP and Vanguard Intermediate

-0.44

Correlation Coefficient

SPDR SP  Vanguard Intermediate

Very good diversification

The 3 months correlation between SPDR and Vanguard is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Vanguard Intermediate Term Cor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate 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 Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of SPDR SP i.e., SPDR SP and Vanguard Intermediate go up and down completely randomly.

Pair Corralation between SPDR SP and Vanguard Intermediate

Considering the 90-day investment horizon SPDR SP 500 is expected to under-perform the Vanguard Intermediate. In addition to that, SPDR SP is 3.37 times more volatile than Vanguard Intermediate Term Corporate. It trades about -0.08 of its total potential returns per unit of risk. Vanguard Intermediate Term Corporate is currently generating about 0.12 per unit of volatility. If you would invest  7,984  in Vanguard Intermediate Term Corporate on December 28, 2024 and sell it today you would earn a total of  183.00  from holding Vanguard Intermediate Term Corporate or generate 2.29% return on investment over 90 days.

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

SPDR SP 500  vs.  Vanguard Intermediate Term Cor

SPDR SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Intermediate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Intermediate Term Corporate are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Vanguard Intermediate is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR SP and Vanguard Intermediate

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

The idea behind SPDR SP 500 and Vanguard Intermediate Term Corporate 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.