Correlation Between Vanguard Mid and SPDR Russell

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

By analyzing existing cross correlation between Vanguard Mid Cap Value and SPDR Russell 1000, you can compare the effects of market volatilities on Vanguard Mid and SPDR Russell 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 Mid with a short position of SPDR Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid and SPDR Russell.

Diversification Opportunities for Vanguard Mid and SPDR Russell

0.95

Correlation Coefficient

Vanguard Mid  SPDR Russell

Almost no diversification

The 3 months correlation between Vanguard and SPDR is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Value and SPDR Russell 1000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Russell 1000 and Vanguard Mid 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 Mid Cap Value are associated (or correlated) with SPDR Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Russell 1000 has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and SPDR Russell go up and down completely randomly.

Pair Corralation between Vanguard Mid and SPDR Russell

Considering the 90-day investment horizon Vanguard Mid Cap Value is not expected to generate positive returns. Moreover, Vanguard Mid is 1.06 times more volatile than SPDR Russell 1000. It trades away all of its potential returns to assume current level of volatility. SPDR Russell 1000 is currently generating about 0.03 per unit of risk. If you would invest  10,770  in SPDR Russell 1000 on December 28, 2024 and sell it today you would earn a total of  136.00  from holding SPDR Russell 1000 or generate 1.26% return on investment over 90 days.

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

Vanguard Mid Cap Value  vs.  SPDR Russell 1000

Vanguard Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Mid Cap Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vanguard Mid is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

SPDR Russell 1000

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Russell 1000 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, SPDR Russell is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Mid and SPDR Russell

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

The idea behind Vanguard Mid Cap Value and SPDR Russell 1000 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.