Correlation Between SPDR Portfolio and Vanguard Mid

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

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

Diversification Opportunities for SPDR Portfolio and Vanguard Mid

0.94

Correlation Coefficient

SPDR Portfolio  Vanguard Mid

Almost no diversification

The 3 months correlation between SPDR and Vanguard is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio SP and Vanguard Mid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap and SPDR Portfolio 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 Portfolio SP are associated (or correlated) with Vanguard Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid Cap has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and Vanguard Mid go up and down completely randomly.

Pair Corralation between SPDR Portfolio and Vanguard Mid

Given the investment horizon of 90 days SPDR Portfolio SP is expected to under-perform the Vanguard Mid. In addition to that, SPDR Portfolio is 1.09 times more volatile than Vanguard Mid Cap Value. It trades about -0.35 of its total potential returns per unit of risk. Vanguard Mid Cap Value is currently generating about -0.37 per unit of volatility. If you would invest  17,414  in Vanguard Mid Cap Value on September 23, 2024 and sell it today you would lose (1,082) from holding Vanguard Mid Cap Value or give up 6.21% of portfolio value over 90 days.

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

SPDR Portfolio SP  vs.  Vanguard Mid Cap Value

SPDR Portfolio SP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Portfolio SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPDR Portfolio is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Vanguard Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Mid Cap Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vanguard Mid is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR Portfolio and Vanguard Mid

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

The idea behind SPDR Portfolio SP and Vanguard Mid Cap Value 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.