Correlation Between Vanguard FTSE and IShares SPTSX
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and IShares SPTSX 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 FTSE and IShares SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Canadian and iShares SPTSX Capped, you can compare the effects of market volatilities on Vanguard FTSE and IShares SPTSX 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 FTSE with a short position of IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and IShares SPTSX.
Diversification Opportunities for Vanguard FTSE and IShares SPTSX
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and IShares is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Canadian and iShares SPTSX Capped in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX Capped and Vanguard FTSE 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 FTSE Canadian are associated (or correlated) with IShares SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SPTSX Capped has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and IShares SPTSX go up and down completely randomly.
Pair Corralation between Vanguard FTSE and IShares SPTSX
Assuming the 90 days trading horizon Vanguard FTSE Canadian is expected to generate 0.55 times more return on investment than IShares SPTSX. However, Vanguard FTSE Canadian is 1.81 times less risky than IShares SPTSX. It trades about 0.24 of its potential returns per unit of risk. iShares SPTSX Capped is currently generating about 0.09 per unit of risk. If you would invest 4,318 in Vanguard FTSE Canadian on September 1, 2024 and sell it today you would earn a total of 755.00 from holding Vanguard FTSE Canadian or generate 17.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Vanguard FTSE Canadian vs. iShares SPTSX Capped
Performance |
| Timeline |
| Vanguard FTSE Canadian |
| iShares SPTSX Capped |
Vanguard FTSE and IShares SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and IShares SPTSX
The main advantage of trading using opposite Vanguard FTSE and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, IShares SPTSX 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 SPTSX will offset losses from the drop in IShares SPTSX's long position.| Vanguard FTSE vs. iShares SPTSX Composite | Vanguard FTSE vs. Vanguard FTSE Canadian | Vanguard FTSE vs. Vanguard SP 500 | Vanguard FTSE vs. iShares Core SPTSX |
| IShares SPTSX vs. iShares SPTSX Capped | IShares SPTSX vs. iShares Canadian Select | IShares SPTSX vs. iShares SPTSX Capped | IShares SPTSX vs. BMO Equal Weight |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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