Correlation Between Vanguard Total and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both Vanguard Total 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 Total 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 Total Market and Vanguard FTSE Canada, you can compare the effects of market volatilities on Vanguard Total 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 Total with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Vanguard FTSE.
Diversification Opportunities for Vanguard Total and Vanguard FTSE
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Market and Vanguard FTSE Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Canada and Vanguard Total 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 Total Market 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 Canada has no effect on the direction of Vanguard Total i.e., Vanguard Total and Vanguard FTSE go up and down completely randomly.
Pair Corralation between Vanguard Total and Vanguard FTSE
Assuming the 90 days trading horizon Vanguard Total Market is expected to generate 1.69 times more return on investment than Vanguard FTSE. However, Vanguard Total is 1.69 times more volatile than Vanguard FTSE Canada. It trades about 0.25 of its potential returns per unit of risk. Vanguard FTSE Canada is currently generating about 0.41 per unit of risk. If you would invest 10,820 in Vanguard Total Market on August 31, 2024 and sell it today you would earn a total of 596.00 from holding Vanguard Total Market or generate 5.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Market vs. Vanguard FTSE Canada
Performance |
| Timeline |
| Vanguard Total Market |
| Vanguard FTSE Canada |
Vanguard Total and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Vanguard FTSE
The main advantage of trading using opposite Vanguard Total and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Total vs. Vanguard FTSE Canada | Vanguard Total vs. Vanguard FTSE Emerging | Vanguard Total vs. iShares Core MSCI | Vanguard Total vs. Vanguard Canadian Aggregate |
| Vanguard FTSE vs. iShares SPTSX 60 | Vanguard FTSE vs. iShares Core SPTSX | Vanguard FTSE vs. Vanguard FTSE Canada | Vanguard FTSE vs. Global X SPTSX |
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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