Correlation Between SPDR SP and Vanguard Dividend

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

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

Diversification Opportunities for SPDR SP and Vanguard Dividend

0.75

Correlation Coefficient

SPDR SP  Vanguard Dividend

Poor diversification

The 3 months correlation between SPDR and Vanguard is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Vanguard Dividend Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Dividend and SPDR SP 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 SP 500 are associated (or correlated) with Vanguard Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Dividend has no effect on the direction of SPDR SP i.e., SPDR SP and Vanguard Dividend go up and down completely randomly.

Pair Corralation between SPDR SP and Vanguard Dividend

Considering the 90-day investment horizon SPDR SP 500 is expected to under-perform the Vanguard Dividend. In addition to that, SPDR SP is 1.32 times more volatile than Vanguard Dividend Appreciation. It trades about -0.16 of its total potential returns per unit of risk. Vanguard Dividend Appreciation is currently generating about -0.19 per unit of volatility. If you would invest  18,153  in Vanguard Dividend Appreciation on January 30, 2024 and sell it today you would lose (435.73) from holding Vanguard Dividend Appreciation or give up 2.4% of portfolio value over 90 days.

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

SPDR SP 500  vs.  Vanguard Dividend Appreciation

SPDR SP 500

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

Vanguard Dividend

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Dividend Appreciation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Vanguard Dividend is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SPDR SP and Vanguard Dividend

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

The idea behind SPDR SP 500 and Vanguard Dividend Appreciation 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..