Correlation Between Vanguard Small and SPDR DoubleLine

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

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

Diversification Opportunities for Vanguard Small and SPDR DoubleLine

0.91

Correlation Coefficient

Vanguard Small  SPDR DoubleLine

Almost no diversification

The 3 months correlation between Vanguard and SPDR is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and SPDR DoubleLine Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR DoubleLine Emerging and Vanguard Small 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 Small Cap Index are associated (or correlated) with SPDR DoubleLine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR DoubleLine Emerging has no effect on the direction of Vanguard Small i.e., Vanguard Small and SPDR DoubleLine go up and down completely randomly.

Pair Corralation between Vanguard Small and SPDR DoubleLine

Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 9.98 times more return on investment than SPDR DoubleLine. However, Vanguard Small is 9.98 times more volatile than SPDR DoubleLine Emerging. It trades about 0.2 of its potential returns per unit of risk. SPDR DoubleLine Emerging is currently generating about 0.48 per unit of risk. If you would invest  21,623  in Vanguard Small Cap Index on May 1, 2025 and sell it today you would earn a total of  2,875  from holding Vanguard Small Cap Index or generate 13.3% return on investment over 90 days.

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

Vanguard Small Cap Index  vs.  SPDR DoubleLine Emerging

Vanguard Small Cap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Vanguard Small sustained solid returns over the last few months and may actually be approaching a breakup point.

SPDR DoubleLine Emerging

Risk-Adjusted Performance

Very Strong

Over the last 90 days SPDR DoubleLine Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, SPDR DoubleLine is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Vanguard Small and SPDR DoubleLine

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

The idea behind Vanguard Small Cap Index and SPDR DoubleLine Emerging 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.