Correlation Between Vanguard Total and RBC Target
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and RBC Target 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 RBC Target 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 RBC Target 2025, you can compare the effects of market volatilities on Vanguard Total and RBC Target 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 RBC Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and RBC Target.
Diversification Opportunities for Vanguard Total and RBC Target
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and RBC is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Market and RBC Target 2025 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Target 2025 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 RBC Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Target 2025 has no effect on the direction of Vanguard Total i.e., Vanguard Total and RBC Target go up and down completely randomly.
Pair Corralation between Vanguard Total and RBC Target
Assuming the 90 days trading horizon Vanguard Total Market is expected to generate 11.73 times more return on investment than RBC Target. However, Vanguard Total is 11.73 times more volatile than RBC Target 2025. It trades about 0.12 of its potential returns per unit of risk. RBC Target 2025 is currently generating about 0.31 per unit of risk. If you would invest 9,138 in Vanguard Total Market on September 3, 2024 and sell it today you would earn a total of 1,502 from holding Vanguard Total Market or generate 16.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Market vs. RBC Target 2025
Performance |
| Timeline |
| Vanguard Total Market |
| RBC Target 2025 |
Vanguard Total and RBC Target Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and RBC Target
The main advantage of trading using opposite Vanguard Total and RBC Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, RBC Target 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 Target will offset losses from the drop in RBC Target's long position.| Vanguard Total vs. Vanguard FTSE Developed | Vanguard Total vs. iShares Core Canadian | Vanguard Total vs. BMO Long Federal | Vanguard Total vs. Vanguard FTSE Canada |
| RBC Target vs. RBC Target 2029 | RBC Target vs. RBC Quant Dividend | RBC Target vs. RBC Quant EAFE | RBC Target vs. RBC Quant European |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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