Correlation Between Vanguard Total and Wealthsimple Developed
Can any of the company-specific risk be diversified away by investing in both Vanguard Total 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 Total 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 Total Market and Wealthsimple Developed Markets, you can compare the effects of market volatilities on Vanguard Total 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 Total with a short position of Wealthsimple Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Wealthsimple Developed.
Diversification Opportunities for Vanguard Total and Wealthsimple Developed
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and Wealthsimple is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Market 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 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 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 Total i.e., Vanguard Total and Wealthsimple Developed go up and down completely randomly.
Pair Corralation between Vanguard Total and Wealthsimple Developed
Assuming the 90 days trading horizon Vanguard Total Market is expected to generate 1.05 times more return on investment than Wealthsimple Developed. However, Vanguard Total is 1.05 times more volatile than Wealthsimple Developed Markets. It trades about 0.18 of its potential returns per unit of risk. Wealthsimple Developed Markets is currently generating about 0.06 per unit of risk. If you would invest 8,515 in Vanguard Total Market on September 3, 2024 and sell it today you would earn a total of 2,924 from holding Vanguard Total Market or generate 34.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Market vs. Wealthsimple Developed Markets
Performance |
| Timeline |
| Vanguard Total Market |
| Wealthsimple Developed |
Vanguard Total and Wealthsimple Developed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Wealthsimple Developed
The main advantage of trading using opposite Vanguard Total and Wealthsimple Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Total vs. Vanguard FTSE Canada | Vanguard Total vs. Vanguard FTSE Emerging | Vanguard Total vs. iShares Core MSCI | Vanguard Total vs. Vanguard Canadian Aggregate |
| 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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