Correlation Between Vanguard FTSE and Wealthsimple Developed
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and Wealthsimple Developed 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 Wealthsimple Developed 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 Wealthsimple Developed Markets, you can compare the effects of market volatilities on Vanguard FTSE and Wealthsimple Developed 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 Wealthsimple Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Wealthsimple Developed.
Diversification Opportunities for Vanguard FTSE and Wealthsimple Developed
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Wealthsimple is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and Wealthsimple Developed Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wealthsimple Developed 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 Wealthsimple Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wealthsimple Developed has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Wealthsimple Developed go up and down completely randomly.
Pair Corralation between Vanguard FTSE and Wealthsimple Developed
Assuming the 90 days trading horizon Vanguard FTSE Developed is expected to under-perform the Wealthsimple Developed. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard FTSE Developed is 1.12 times less risky than Wealthsimple Developed. The etf trades about -0.18 of its potential returns per unit of risk. The Wealthsimple Developed Markets is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 2,983 in Wealthsimple Developed Markets on August 28, 2024 and sell it today you would lose (55.00) from holding Wealthsimple Developed Markets or give up 1.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. Wealthsimple Developed Markets
Performance |
| Timeline |
| Vanguard FTSE Developed |
| Wealthsimple Developed |
Vanguard FTSE and Wealthsimple Developed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and Wealthsimple Developed
The main advantage of trading using opposite Vanguard FTSE and Wealthsimple Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, Wealthsimple Developed 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 Wealthsimple Developed will offset losses from the drop in Wealthsimple Developed's long position.| Vanguard FTSE vs. iShares MSCI EAFE | Vanguard FTSE vs. BMO MSCI EAFE | Vanguard FTSE vs. BMO Low Volatility |
| Wealthsimple Developed vs. Wealthsimple North America | Wealthsimple Developed vs. BMO Long Federal | Wealthsimple Developed vs. BMO Mid Provincial | Wealthsimple Developed vs. BMO Government Bond |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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