Correlation Between Vanguard Momentum and SPDR SP

Can any of the company-specific risk be diversified away by investing in both Vanguard Momentum 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 Momentum 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 Momentum Factor and SPDR SP Dividend, you can compare the effects of market volatilities on Vanguard Momentum 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 Momentum with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Momentum and SPDR SP.

Diversification Opportunities for Vanguard Momentum and SPDR SP

0.71

Correlation Coefficient

Vanguard Momentum  SPDR SP

Poor diversification

The 3 months correlation between Vanguard and SPDR is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Momentum Factor and SPDR SP Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Dividend and Vanguard Momentum 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 Momentum Factor 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 Dividend has no effect on the direction of Vanguard Momentum i.e., Vanguard Momentum and SPDR SP go up and down completely randomly.

Pair Corralation between Vanguard Momentum and SPDR SP

Given the investment horizon of 90 days Vanguard Momentum Factor is expected to generate 1.27 times more return on investment than SPDR SP. However, Vanguard Momentum is 1.27 times more volatile than SPDR SP Dividend. It trades about 0.05 of its potential returns per unit of risk. SPDR SP Dividend is currently generating about 0.02 per unit of risk. If you would invest  11,110  in Vanguard Momentum Factor on February 3, 2024 and sell it today you would earn a total of  3,330  from holding Vanguard Momentum Factor or generate 29.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Vanguard Momentum Factor  vs.  SPDR SP Dividend

Vanguard Momentum Factor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Momentum Factor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Vanguard Momentum is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

SPDR SP Dividend

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Dividend are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental 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 Momentum and SPDR SP

The main advantage of trading using opposite Vanguard Momentum and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Momentum 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 Momentum Factor and SPDR SP Dividend 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 CEOs Directory module to screen CEOs from public companies around the world.