Correlation Between Vanguard Total and SPDR MSCI

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

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

Diversification Opportunities for Vanguard Total and SPDR MSCI

0.96

Correlation Coefficient

Vanguard Total  SPDR MSCI

Almost no diversification

The 3 months correlation between Vanguard and SPDR is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total World and SPDR MSCI ACWI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI ACWI and Vanguard Total 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 Total World are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI ACWI has no effect on the direction of Vanguard Total i.e., Vanguard Total and SPDR MSCI go up and down completely randomly.

Pair Corralation between Vanguard Total and SPDR MSCI

Allowing for the 90-day total investment horizon Vanguard Total World is expected to generate 0.93 times more return on investment than SPDR MSCI. However, Vanguard Total World is 1.08 times less risky than SPDR MSCI. It trades about 0.05 of its potential returns per unit of risk. SPDR MSCI ACWI is currently generating about 0.03 per unit of risk. If you would invest  12,020  in Vanguard Total World on October 26, 2024 and sell it today you would earn a total of  169.00  from holding Vanguard Total World or generate 1.41% return on investment over 90 days.

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

Vanguard Total World  vs.  SPDR MSCI ACWI

Vanguard Total World

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total World are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vanguard Total is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR MSCI ACWI

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI ACWI are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SPDR MSCI is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard Total and SPDR MSCI

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

The idea behind Vanguard Total World and SPDR MSCI ACWI 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.