Correlation Between Vanguard Materials and SPDR SP

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

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

Diversification Opportunities for Vanguard Materials and SPDR SP

0.62

Correlation Coefficient

Vanguard Materials  SPDR SP

Poor diversification

The 3 months correlation between Vanguard and SPDR is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Materials Index and SPDR SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Global and Vanguard Materials 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 Vanguard Materials Index are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Global has no effect on the direction of Vanguard Materials i.e., Vanguard Materials and SPDR SP go up and down completely randomly.

Pair Corralation between Vanguard Materials and SPDR SP

Considering the 90-day investment horizon Vanguard Materials is expected to generate 7.88 times less return on investment than SPDR SP. In addition to that, Vanguard Materials is 1.16 times more volatile than SPDR SP Global. It trades about 0.02 of its total potential returns per unit of risk. SPDR SP Global is currently generating about 0.16 per unit of volatility. If you would invest  4,964  in SPDR SP Global on December 25, 2024 and sell it today you would earn a total of  426.00  from holding SPDR SP Global or generate 8.58% return on investment over 90 days.

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

Vanguard Materials Index  vs.  SPDR SP Global

Vanguard Materials Index

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Materials Index are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard Materials is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SPDR SP Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vanguard Materials and SPDR SP

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

The idea behind Vanguard Materials Index and SPDR SP Global 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.