Correlation Between Vanguard Canadian and IShares Core
Can any of the company-specific risk be diversified away by investing in both Vanguard Canadian and IShares Core 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 Canadian and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Canadian Aggregate and iShares Core MSCI, you can compare the effects of market volatilities on Vanguard Canadian and IShares Core 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 Canadian with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Canadian and IShares Core.
Diversification Opportunities for Vanguard Canadian and IShares Core
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and IShares is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Canadian Aggregate and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI and Vanguard Canadian 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 Canadian Aggregate are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core MSCI has no effect on the direction of Vanguard Canadian i.e., Vanguard Canadian and IShares Core go up and down completely randomly.
Pair Corralation between Vanguard Canadian and IShares Core
Assuming the 90 days trading horizon Vanguard Canadian Aggregate is expected to generate 0.69 times more return on investment than IShares Core. However, Vanguard Canadian Aggregate is 1.45 times less risky than IShares Core. It trades about 0.1 of its potential returns per unit of risk. iShares Core MSCI is currently generating about 0.01 per unit of risk. If you would invest 2,300 in Vanguard Canadian Aggregate on August 31, 2024 and sell it today you would earn a total of 21.00 from holding Vanguard Canadian Aggregate or generate 0.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Canadian Aggregate vs. iShares Core MSCI
Performance |
| Timeline |
| Vanguard Canadian |
| iShares Core MSCI |
Vanguard Canadian and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Canadian and IShares Core
The main advantage of trading using opposite Vanguard Canadian and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Canadian position performs unexpectedly, IShares Core 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 IShares Core will offset losses from the drop in IShares Core's long position.| Vanguard Canadian vs. Vanguard Canadian Short | Vanguard Canadian vs. Vanguard FTSE Canada | Vanguard Canadian vs. Vanguard FTSE Global | Vanguard Canadian vs. Vanguard FTSE Emerging |
| IShares Core vs. Vanguard FTSE Emerging | IShares Core vs. Vanguard FTSE Developed | IShares Core vs. Vanguard Total Market | IShares Core vs. Vanguard Canadian Aggregate |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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