Correlation Between Vanguard ESG and SPDR SSGA

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

By analyzing existing cross correlation between Vanguard ESG Corporate and SPDR SSGA My2027, you can compare the effects of market volatilities on Vanguard ESG and SPDR SSGA 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 ESG with a short position of SPDR SSGA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard ESG and SPDR SSGA.

Diversification Opportunities for Vanguard ESG and SPDR SSGA

0.1

Correlation Coefficient

Vanguard ESG  SPDR SSGA

Average diversification

The 3 months correlation between Vanguard and SPDR is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard ESG Corporate and SPDR SSGA My2027 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA My2027 and Vanguard ESG 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 ESG Corporate are associated (or correlated) with SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA My2027 has no effect on the direction of Vanguard ESG i.e., Vanguard ESG and SPDR SSGA go up and down completely randomly.

Pair Corralation between Vanguard ESG and SPDR SSGA

Given the investment horizon of 90 days Vanguard ESG Corporate is expected to under-perform the SPDR SSGA. In addition to that, Vanguard ESG is 2.97 times more volatile than SPDR SSGA My2027. It trades about -0.04 of its total potential returns per unit of risk. SPDR SSGA My2027 is currently generating about 0.1 per unit of volatility. If you would invest  2,459  in SPDR SSGA My2027 on October 24, 2024 and sell it today you would earn a total of  17.00  from holding SPDR SSGA My2027 or generate 0.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Vanguard ESG Corporate  vs.  SPDR SSGA My2027

Vanguard ESG Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard ESG Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Vanguard ESG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SPDR SSGA My2027

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSGA My2027 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, SPDR SSGA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard ESG and SPDR SSGA

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

The idea behind Vanguard ESG Corporate and SPDR SSGA My2027 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.