Correlation Between Vanguard FTSE and SPDR EURO

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

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

Diversification Opportunities for Vanguard FTSE and SPDR EURO

0.98

Correlation Coefficient

Vanguard FTSE  SPDR EURO

Almost no diversification

The 3 months correlation between Vanguard and SPDR is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Europe and SPDR EURO STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR EURO STOXX and Vanguard FTSE 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 FTSE Europe are associated (or correlated) with SPDR EURO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR EURO STOXX has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and SPDR EURO go up and down completely randomly.

Pair Corralation between Vanguard FTSE and SPDR EURO

Considering the 90-day investment horizon Vanguard FTSE Europe is expected to generate 0.8 times more return on investment than SPDR EURO. However, Vanguard FTSE Europe is 1.25 times less risky than SPDR EURO. It trades about -0.14 of its potential returns per unit of risk. SPDR EURO STOXX is currently generating about -0.13 per unit of risk. If you would invest  7,076  in Vanguard FTSE Europe on August 30, 2024 and sell it today you would lose (544.00) from holding Vanguard FTSE Europe or give up 7.69% of portfolio value over 90 days.

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

Vanguard FTSE Europe  vs.  SPDR EURO STOXX

Vanguard FTSE Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Europe has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Etf's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

SPDR EURO STOXX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR EURO STOXX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Vanguard FTSE and SPDR EURO

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

The idea behind Vanguard FTSE Europe and SPDR EURO STOXX 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.