Correlation Between Vanguard Small and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and SPDR MSCI 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 MSCI 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 MSCI Emerging, you can compare the effects of market volatilities on Vanguard Small and SPDR MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and SPDR MSCI.
Diversification Opportunities for Vanguard Small and SPDR MSCI
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and SPDR is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and SPDR MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI Emerging has no effect on the direction of Vanguard Small i.e., Vanguard Small and SPDR MSCI go up and down completely randomly.
Pair Corralation between Vanguard Small and SPDR MSCI
Allowing for the 90-day total investment horizon Vanguard Small is expected to generate 1.93 times less return on investment than SPDR MSCI. In addition to that, Vanguard Small is 1.4 times more volatile than SPDR MSCI Emerging. It trades about 0.04 of its total potential returns per unit of risk. SPDR MSCI Emerging is currently generating about 0.1 per unit of volatility. If you would invest 5,761 in SPDR MSCI Emerging on February 24, 2024 and sell it today you would earn a total of 226.00 from holding SPDR MSCI Emerging or generate 3.92% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 96.92% |
Values | Daily Returns |
Vanguard Small Cap Index vs. SPDR MSCI Emerging
Performance |
Timeline |
Vanguard Small Cap |
SPDR MSCI Emerging |
Vanguard Small and SPDR MSCI Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Small and SPDR MSCI
The main advantage of trading using opposite Vanguard Small and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, SPDR MSCI 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 MSCI will offset losses from the drop in SPDR MSCI's long position.Vanguard Small vs. Invesco FTSE RAFI | Vanguard Small vs. Invesco FTSE RAFI | Vanguard Small vs. Invesco FTSE RAFI | Vanguard Small vs. Invesco FTSE RAFI |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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