Correlation Between Vanguard Canadian and Fidelity Momentum
Can any of the company-specific risk be diversified away by investing in both Vanguard Canadian and Fidelity Momentum 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 Fidelity Momentum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Canadian Government and Fidelity Momentum ETF, you can compare the effects of market volatilities on Vanguard Canadian and Fidelity Momentum 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 Fidelity Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Canadian and Fidelity Momentum.
Diversification Opportunities for Vanguard Canadian and Fidelity Momentum
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and Fidelity is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Canadian Government and Fidelity Momentum ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Momentum ETF 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 Government are associated (or correlated) with Fidelity Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Momentum ETF has no effect on the direction of Vanguard Canadian i.e., Vanguard Canadian and Fidelity Momentum go up and down completely randomly.
Pair Corralation between Vanguard Canadian and Fidelity Momentum
Assuming the 90 days trading horizon Vanguard Canadian is expected to generate 5.2 times less return on investment than Fidelity Momentum. But when comparing it to its historical volatility, Vanguard Canadian Government is 2.0 times less risky than Fidelity Momentum. It trades about 0.16 of its potential returns per unit of risk. Fidelity Momentum ETF is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 1,614 in Fidelity Momentum ETF on September 1, 2024 and sell it today you would earn a total of 154.00 from holding Fidelity Momentum ETF or generate 9.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Vanguard Canadian Government vs. Fidelity Momentum ETF
Performance |
| Timeline |
| Vanguard Canadian |
| Fidelity Momentum ETF |
Vanguard Canadian and Fidelity Momentum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Canadian and Fidelity Momentum
The main advantage of trading using opposite Vanguard Canadian and Fidelity Momentum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Canadian position performs unexpectedly, Fidelity Momentum 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 Fidelity Momentum will offset losses from the drop in Fidelity Momentum's long position.| Vanguard Canadian vs. BetaPro Gold Bullion | Vanguard Canadian vs. BetaPro SP TSX | Vanguard Canadian vs. BetaPro SPTSX Capped | Vanguard Canadian vs. Global X Active |
| Fidelity Momentum vs. Brompton Global Dividend | Fidelity Momentum vs. Global Healthcare Income | Fidelity Momentum vs. Tech Leaders Income | Fidelity Momentum vs. Brompton North American |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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