Correlation Between Vanguard Total and SPDR DoubleLine

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

Diversification Opportunities for Vanguard Total and SPDR DoubleLine

-0.12

Correlation Coefficient

Vanguard Total  SPDR DoubleLine

Good diversification

The 3 months correlation between Vanguard and SPDR is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and SPDR DoubleLine Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR DoubleLine Short and Vanguard Total 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 Total Bond 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 Short has no effect on the direction of Vanguard Total i.e., Vanguard Total and SPDR DoubleLine go up and down completely randomly.

Pair Corralation between Vanguard Total and SPDR DoubleLine

Considering the 90-day investment horizon Vanguard Total Bond is expected to under-perform the SPDR DoubleLine. In addition to that, Vanguard Total is 4.34 times more volatile than SPDR DoubleLine Short. It trades about -0.15 of its total potential returns per unit of risk. SPDR DoubleLine Short is currently generating about -0.12 per unit of volatility. If you would invest  4,678  in SPDR DoubleLine Short on February 2, 2024 and sell it today you would lose (11.00) from holding SPDR DoubleLine Short or give up 0.24% of portfolio value over 90 days.

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

Vanguard Total Bond  vs.  SPDR DoubleLine Short

Vanguard Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Total Bond has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

SPDR DoubleLine Short

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR DoubleLine Short are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR DoubleLine is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Total and SPDR DoubleLine

The main advantage of trading using opposite Vanguard Total and SPDR DoubleLine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Total Bond and SPDR DoubleLine Short 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.