Correlation Between SSgA SPDR and Vanguard Funds

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

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

Diversification Opportunities for SSgA SPDR and Vanguard Funds

0.9

Correlation Coefficient

SSgA SPDR  Vanguard Funds

Almost no diversification

The 3 months correlation between SSgA and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding SSgA SPDR ETFs and Vanguard Funds Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Funds Public and SSgA SPDR 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 SSgA SPDR ETFs are associated (or correlated) with Vanguard Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Funds Public has no effect on the direction of SSgA SPDR i.e., SSgA SPDR and Vanguard Funds go up and down completely randomly.

Pair Corralation between SSgA SPDR and Vanguard Funds

Assuming the 90 days trading horizon SSgA SPDR ETFs is expected to generate 0.53 times more return on investment than Vanguard Funds. However, SSgA SPDR ETFs is 1.87 times less risky than Vanguard Funds. It trades about -0.07 of its potential returns per unit of risk. Vanguard Funds Public is currently generating about -0.1 per unit of risk. If you would invest  5,193  in SSgA SPDR ETFs on December 27, 2024 and sell it today you would lose (128.00) from holding SSgA SPDR ETFs or give up 2.46% of portfolio value over 90 days.

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

SSgA SPDR ETFs  vs.  Vanguard Funds Public

SSgA SPDR ETFs

Risk-Adjusted Performance

Very Weak

Over the last 90 days SSgA SPDR ETFs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, SSgA SPDR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Vanguard Funds Public

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SSgA SPDR and Vanguard Funds

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

The idea behind SSgA SPDR ETFs and Vanguard Funds Public 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.