Correlation Between Vanguard Information and SPDR Kensho

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

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

Diversification Opportunities for Vanguard Information and SPDR Kensho

0.39

Correlation Coefficient

Vanguard Information  SPDR Kensho

Weak diversification

The 3 months correlation between Vanguard and SPDR is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Information Technolog and SPDR Kensho Future in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Kensho Future and Vanguard Information 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 Information Technology are associated (or correlated) with SPDR Kensho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Kensho Future has no effect on the direction of Vanguard Information i.e., Vanguard Information and SPDR Kensho go up and down completely randomly.

Pair Corralation between Vanguard Information and SPDR Kensho

Considering the 90-day investment horizon Vanguard Information Technology is expected to generate 1.16 times more return on investment than SPDR Kensho. However, Vanguard Information is 1.16 times more volatile than SPDR Kensho Future. It trades about -0.15 of its potential returns per unit of risk. SPDR Kensho Future is currently generating about -0.3 per unit of risk. If you would invest  60,785  in Vanguard Information Technology on December 4, 2024 and sell it today you would lose (2,949) from holding Vanguard Information Technology or give up 4.85% of portfolio value over 90 days.

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

Vanguard Information Technolog  vs.  SPDR Kensho Future

Vanguard Information

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Information Technology 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

SPDR Kensho Future

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Kensho Future has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, SPDR Kensho is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Information and SPDR Kensho

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

The idea behind Vanguard Information Technology and SPDR Kensho Future 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.