Correlation Between Vulcan Value and SPDR SP

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

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

Diversification Opportunities for Vulcan Value and SPDR SP

-0.38

Correlation Coefficient

Vulcan Value  SPDR SP

Very good diversification

The 3 months correlation between Vulcan and SPDR is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Value Partners and SPDR SP Kensho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Kensho and Vulcan Value 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 Vulcan Value Partners 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 Kensho has no effect on the direction of Vulcan Value i.e., Vulcan Value and SPDR SP go up and down completely randomly.

Pair Corralation between Vulcan Value and SPDR SP

Assuming the 90 days horizon Vulcan Value Partners is expected to under-perform the SPDR SP. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vulcan Value Partners is 1.26 times less risky than SPDR SP. The mutual fund trades about -0.06 of its potential returns per unit of risk. The SPDR SP Kensho is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  5,938  in SPDR SP Kensho on September 16, 2024 and sell it today you would earn a total of  865.00  from holding SPDR SP Kensho or generate 14.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Vulcan Value Partners  vs.  SPDR SP Kensho

Vulcan Value Partners

Risk-Adjusted Performance

0 of 100

Very Weak

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

SPDR SP Kensho

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Kensho are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, SPDR SP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vulcan Value and SPDR SP

The main advantage of trading using opposite Vulcan Value and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Value 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 Vulcan Value Partners and SPDR SP Kensho 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 Transaction History module to view history of all your transactions and understand their impact on performance.