Correlation Between Vanguard STAR and SPDR SP

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

Diversification Opportunities for Vanguard STAR and SPDR SP

-0.56

Correlation Coefficient

Vanguard STAR  SPDR SP

Excellent diversification

The 3 months correlation between Vanguard and SPDR is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard STAR Funds and SPDR SP Regional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Regional and Vanguard STAR 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 STAR Funds 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 Regional has no effect on the direction of Vanguard STAR i.e., Vanguard STAR and SPDR SP go up and down completely randomly.

Pair Corralation between Vanguard STAR and SPDR SP

Assuming the 90 days trading horizon Vanguard STAR Funds is expected to generate 0.52 times more return on investment than SPDR SP. However, Vanguard STAR Funds is 1.91 times less risky than SPDR SP. It trades about 0.29 of its potential returns per unit of risk. SPDR SP Regional is currently generating about -0.22 per unit of risk. If you would invest  99,000  in Vanguard STAR Funds on February 3, 2024 and sell it today you would earn a total of  3,160  from holding Vanguard STAR Funds or generate 3.19% return on investment over 90 days.

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

Vanguard STAR Funds  vs.  SPDR SP Regional

Vanguard STAR Funds

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard STAR Funds are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Vanguard STAR is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SPDR SP Regional

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Regional has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Vanguard STAR and SPDR SP

The main advantage of trading using opposite Vanguard STAR and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard STAR 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 STAR Funds and SPDR SP Regional 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.