Correlation Between Vanguard Intermediate and SPDR SSGA

Can any of the company-specific risk be diversified away by investing in both Vanguard Intermediate 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 Intermediate 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 Intermediate Term Corporate and SPDR SSGA My2027, you can compare the effects of market volatilities on Vanguard Intermediate 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 Intermediate with a short position of SPDR SSGA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Intermediate and SPDR SSGA.

Diversification Opportunities for Vanguard Intermediate and SPDR SSGA

0.5

Correlation Coefficient

Vanguard Intermediate  SPDR SSGA

Very weak diversification

The 3 months correlation between Vanguard and SPDR is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Cor 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 Intermediate 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 Intermediate Term 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 Intermediate i.e., Vanguard Intermediate and SPDR SSGA go up and down completely randomly.

Pair Corralation between Vanguard Intermediate and SPDR SSGA

Given the investment horizon of 90 days Vanguard Intermediate Term Corporate is expected to generate 2.61 times more return on investment than SPDR SSGA. However, Vanguard Intermediate is 2.61 times more volatile than SPDR SSGA My2027. It trades about 0.04 of its potential returns per unit of risk. SPDR SSGA My2027 is currently generating about -0.02 per unit of risk. If you would invest  7,710  in Vanguard Intermediate Term Corporate on October 9, 2024 and sell it today you would earn a total of  270.00  from holding Vanguard Intermediate Term Corporate or generate 3.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	29.55%
Values	Daily Returns

Vanguard Intermediate Term Cor  vs.  SPDR SSGA My2027

Vanguard Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Intermediate Term Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

SPDR SSGA My2027

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSGA My2027 are ranked lower than 3 (%) 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 Intermediate and SPDR SSGA

The main advantage of trading using opposite Vanguard Intermediate and SPDR SSGA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Intermediate 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 Intermediate Term 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.