Correlation Between Vanguard Dividend and SPDR Portfolio

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

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

Diversification Opportunities for Vanguard Dividend and SPDR Portfolio

0.85

Correlation Coefficient

Vanguard Dividend  SPDR Portfolio

Very poor diversification

The 3 months correlation between Vanguard and SPDR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Dividend Appreciation and SPDR Portfolio SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio SP and Vanguard Dividend 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 Dividend Appreciation are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio SP has no effect on the direction of Vanguard Dividend i.e., Vanguard Dividend and SPDR Portfolio go up and down completely randomly.

Pair Corralation between Vanguard Dividend and SPDR Portfolio

Considering the 90-day investment horizon Vanguard Dividend Appreciation is expected to generate 0.75 times more return on investment than SPDR Portfolio. However, Vanguard Dividend Appreciation is 1.33 times less risky than SPDR Portfolio. It trades about -0.01 of its potential returns per unit of risk. SPDR Portfolio SP is currently generating about -0.09 per unit of risk. If you would invest  19,580  in Vanguard Dividend Appreciation on December 28, 2024 and sell it today you would lose (122.00) from holding Vanguard Dividend Appreciation or give up 0.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Vanguard Dividend Appreciation  vs.  SPDR Portfolio SP

Vanguard Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Dividend Appreciation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Vanguard Dividend is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

SPDR Portfolio SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Portfolio SP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, SPDR Portfolio 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 Dividend and SPDR Portfolio

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

The idea behind Vanguard Dividend Appreciation and SPDR Portfolio SP 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.

Check out your portfolio center.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..