Correlation Between Vanguard and Vanguard Canadian
Can any of the company-specific risk be diversified away by investing in both Vanguard and Vanguard Canadian 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 Vanguard Canadian 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 Vanguard Canadian Aggregate, you can compare the effects of market volatilities on Vanguard and Vanguard Canadian 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 Vanguard Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Vanguard Canadian.
Diversification Opportunities for Vanguard and Vanguard Canadian
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and Vanguard is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Vanguard Canadian Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Canadian 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 Vanguard Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Canadian has no effect on the direction of Vanguard i.e., Vanguard and Vanguard Canadian go up and down completely randomly.
Pair Corralation between Vanguard and Vanguard Canadian
Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 2.77 times more return on investment than Vanguard Canadian. However, Vanguard is 2.77 times more volatile than Vanguard Canadian Aggregate. It trades about 0.19 of its potential returns per unit of risk. Vanguard Canadian Aggregate is currently generating about -0.08 per unit of risk. If you would invest 14,278 in Vanguard SP 500 on August 25, 2024 and sell it today you would earn a total of 539.00 from holding Vanguard SP 500 or generate 3.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard SP 500 vs. Vanguard Canadian Aggregate
Performance |
| Timeline |
| Vanguard SP 500 |
| Vanguard Canadian |
Vanguard and Vanguard Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and Vanguard Canadian
The main advantage of trading using opposite Vanguard and Vanguard Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, Vanguard Canadian 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 Vanguard Canadian will offset losses from the drop in Vanguard Canadian's long position.The idea behind Vanguard SP 500 and Vanguard Canadian Aggregate 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.| Vanguard Canadian vs. Vanguard Canadian Short | Vanguard Canadian vs. Vanguard FTSE Canada | Vanguard Canadian vs. Vanguard FTSE Global | Vanguard Canadian vs. Vanguard FTSE Emerging |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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