Correlation Between Vanguard Canadian and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both Vanguard Canadian and Vanguard FTSE 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 Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Canadian Short Term and Vanguard FTSE Developed, you can compare the effects of market volatilities on Vanguard Canadian and Vanguard FTSE 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 Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Canadian and Vanguard FTSE.
Diversification Opportunities for Vanguard Canadian and Vanguard FTSE
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Vanguard and Vanguard is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Canadian Short Term and Vanguard FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Developed 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 Short Term are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Developed has no effect on the direction of Vanguard Canadian i.e., Vanguard Canadian and Vanguard FTSE go up and down completely randomly.
Pair Corralation between Vanguard Canadian and Vanguard FTSE
Assuming the 90 days trading horizon Vanguard Canadian Short Term is expected to generate 0.18 times more return on investment than Vanguard FTSE. However, Vanguard Canadian Short Term is 5.45 times less risky than Vanguard FTSE. It trades about -0.07 of its potential returns per unit of risk. Vanguard FTSE Developed is currently generating about -0.17 per unit of risk. If you would invest 2,402 in Vanguard Canadian Short Term on October 14, 2024 and sell it today you would lose (4.00) from holding Vanguard Canadian Short Term or give up 0.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Canadian Short Term vs. Vanguard FTSE Developed
Performance |
| Timeline |
| Vanguard Canadian Short |
| Vanguard FTSE Developed |
Vanguard Canadian and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Canadian and Vanguard FTSE
The main advantage of trading using opposite Vanguard Canadian and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Canadian position performs unexpectedly, Vanguard FTSE 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 FTSE will offset losses from the drop in Vanguard FTSE's long position.| Vanguard Canadian vs. Vanguard Canadian Short | Vanguard Canadian vs. Global X Active | Vanguard Canadian vs. Invesco 1 5 Year | Vanguard Canadian vs. iShares Canadian HYBrid |
| Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard Total Market | Vanguard FTSE vs. Vanguard FTSE Canada | Vanguard FTSE 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.
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