Correlation Between SPDR FTSE and Vanguard Total

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

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

Diversification Opportunities for SPDR FTSE and Vanguard Total

0.78

Correlation Coefficient

SPDR FTSE  Vanguard Total

Poor diversification

The 3 months correlation between SPDR and Vanguard is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding SPDR FTSE International and Vanguard Total Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Bond and SPDR FTSE 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 SPDR FTSE International are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Bond has no effect on the direction of SPDR FTSE i.e., SPDR FTSE and Vanguard Total go up and down completely randomly.

Pair Corralation between SPDR FTSE and Vanguard Total

Considering the 90-day investment horizon SPDR FTSE International is expected to generate 2.13 times more return on investment than Vanguard Total. However, SPDR FTSE is 2.13 times more volatile than Vanguard Total Bond. It trades about 0.11 of its potential returns per unit of risk. Vanguard Total Bond is currently generating about 0.11 per unit of risk. If you would invest  3,599  in SPDR FTSE International on December 28, 2024 and sell it today you would earn a total of  144.00  from holding SPDR FTSE International or generate 4.0% return on investment over 90 days.

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

SPDR FTSE International  vs.  Vanguard Total Bond

SPDR FTSE International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR FTSE International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, SPDR FTSE is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Vanguard Total Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Bond are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR FTSE and Vanguard Total

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

The idea behind SPDR FTSE International and Vanguard Total Bond 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.