Correlation Between Vanguard and SPDR Gold
Can any of the company-specific risk be diversified away by investing in both Vanguard and SPDR Gold 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 and SPDR Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP 500 and SPDR Gold Shares, you can compare the effects of market volatilities on Vanguard and SPDR Gold 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 with a short position of SPDR Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and SPDR Gold.
Diversification Opportunities for Vanguard and SPDR Gold
Very good diversification
The 3 months correlation between Vanguard and SPDR is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and SPDR Gold Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Gold Shares and Vanguard 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 SP 500 are associated (or correlated) with SPDR Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Gold Shares has no effect on the direction of Vanguard i.e., Vanguard and SPDR Gold go up and down completely randomly.
Pair Corralation between Vanguard and SPDR Gold
Considering the 90-day investment horizon Vanguard SP 500 is expected to under-perform the SPDR Gold. In addition to that, Vanguard is 1.25 times more volatile than SPDR Gold Shares. It trades about -0.08 of its total potential returns per unit of risk. SPDR Gold Shares is currently generating about 0.28 per unit of volatility. If you would invest 24,307 in SPDR Gold Shares on December 26, 2024 and sell it today you would earn a total of 3,517 from holding SPDR Gold Shares or generate 14.47% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Vanguard SP 500 vs. SPDR Gold Shares
Performance |
Timeline |
Vanguard SP 500 |
SPDR Gold Shares |
Vanguard and SPDR Gold Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard and SPDR Gold
The main advantage of trading using opposite Vanguard and SPDR Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, SPDR Gold 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 Gold will offset losses from the drop in SPDR Gold's long position.Vanguard vs. Vanguard Total Stock | Vanguard vs. Vanguard High Dividend | Vanguard vs. Vanguard Information Technology | Vanguard vs. Invesco QQQ Trust |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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