Correlation Between Vanguard and Dynamic Active
Can any of the company-specific risk be diversified away by investing in both Vanguard and Dynamic Active 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 and Dynamic Active into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP 500 and Dynamic Active Dividend, you can compare the effects of market volatilities on Vanguard and Dynamic Active 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 with a short position of Dynamic Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Dynamic Active.
Diversification Opportunities for Vanguard and Dynamic Active
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Dynamic is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Dynamic Active Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Active Dividend and Vanguard 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 SP 500 are associated (or correlated) with Dynamic Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Active Dividend has no effect on the direction of Vanguard i.e., Vanguard and Dynamic Active go up and down completely randomly.
Pair Corralation between Vanguard and Dynamic Active
Assuming the 90 days trading horizon Vanguard is expected to generate 1.1 times less return on investment than Dynamic Active. But when comparing it to its historical volatility, Vanguard SP 500 is 1.53 times less risky than Dynamic Active. It trades about 0.16 of its potential returns per unit of risk. Dynamic Active Dividend is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 4,178 in Dynamic Active Dividend on September 1, 2024 and sell it today you would earn a total of 2,295 from holding Dynamic Active Dividend or generate 54.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Vanguard SP 500 vs. Dynamic Active Dividend
Performance |
| Timeline |
| Vanguard SP 500 |
| Dynamic Active Dividend |
Vanguard and Dynamic Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and Dynamic Active
The main advantage of trading using opposite Vanguard and Dynamic Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, Dynamic Active 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 Dynamic Active will offset losses from the drop in Dynamic Active's long position.| Vanguard vs. Vanguard FTSE Canadian | Vanguard vs. Vanguard Growth Portfolio | Vanguard vs. Vanguard SP 500 | Vanguard vs. Vanguard FTSE Canada |
| Dynamic Active vs. Dynamic Active Global | Dynamic Active vs. Dynamic Active Canadian | Dynamic Active vs. Dynamic Active Preferred | Dynamic Active vs. Dynamic Active Global |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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