Correlation Between Vanguard FTSE and RBC Quant
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and RBC Quant 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 RBC Quant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Developed and RBC Quant Emerging, you can compare the effects of market volatilities on Vanguard FTSE and RBC Quant 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 RBC Quant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and RBC Quant.
Diversification Opportunities for Vanguard FTSE and RBC Quant
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and RBC is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and RBC Quant Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Quant Emerging 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 Developed are associated (or correlated) with RBC Quant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Quant Emerging has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and RBC Quant go up and down completely randomly.
Pair Corralation between Vanguard FTSE and RBC Quant
Assuming the 90 days trading horizon Vanguard FTSE is expected to generate 3.76 times less return on investment than RBC Quant. But when comparing it to its historical volatility, Vanguard FTSE Developed is 1.27 times less risky than RBC Quant. It trades about 0.08 of its potential returns per unit of risk. RBC Quant Emerging is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,106 in RBC Quant Emerging on September 25, 2024 and sell it today you would earn a total of 80.00 from holding RBC Quant Emerging or generate 3.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. RBC Quant Emerging
Performance |
| Timeline |
| Vanguard FTSE Developed |
| RBC Quant Emerging |
Vanguard FTSE and RBC Quant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and RBC Quant
The main advantage of trading using opposite Vanguard FTSE and RBC Quant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, RBC Quant 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 RBC Quant will offset losses from the drop in RBC Quant's long position.| Vanguard FTSE vs. Vanguard Total Market | Vanguard FTSE vs. Vanguard Canadian Short Term | Vanguard FTSE vs. iShares Dividend Growers | Vanguard FTSE vs. iShares High Quality |
| RBC Quant vs. Vanguard FTSE Developed | RBC Quant vs. Vanguard Total Market | RBC Quant vs. Vanguard FTSE Canada | RBC Quant 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |