Correlation Between Vanguard Growth and SPDR SP

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

By analyzing existing cross correlation between Vanguard Growth Index and SPDR SP 500, you can compare the effects of market volatilities on Vanguard Growth and SPDR SP 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 Growth with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Growth and SPDR SP.

Diversification Opportunities for Vanguard Growth and SPDR SP

0.96

Correlation Coefficient

Vanguard Growth  SPDR SP

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 Growth Index and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 and Vanguard Growth 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 Growth Index are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and SPDR SP go up and down completely randomly.

Pair Corralation between Vanguard Growth and SPDR SP

Considering the 90-day investment horizon Vanguard Growth Index is expected to under-perform the SPDR SP. In addition to that, Vanguard Growth is 1.43 times more volatile than SPDR SP 500. It trades about -0.11 of its total potential returns per unit of risk. SPDR SP 500 is currently generating about -0.07 per unit of volatility. If you would invest  59,323  in SPDR SP 500 on December 27, 2024 and sell it today you would lose (2,621) from holding SPDR SP 500 or give up 4.42% of portfolio value over 90 days.

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

Vanguard Growth Index  vs.  SPDR SP 500

Vanguard Growth Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Growth Index has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

SPDR SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Growth and SPDR SP

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

The idea behind Vanguard Growth Index and SPDR SP 500 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.