Correlation Between First Asset and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both First Asset 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 First Asset and Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Asset Morningstar and Vanguard FTSE Canada, you can compare the effects of market volatilities on First Asset 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 First Asset with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Asset and Vanguard FTSE.
Diversification Opportunities for First Asset and Vanguard FTSE
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Vanguard is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding First Asset Morningstar 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 First Asset 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 First Asset Morningstar 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 First Asset i.e., First Asset and Vanguard FTSE go up and down completely randomly.
Pair Corralation between First Asset and Vanguard FTSE
Assuming the 90 days trading horizon First Asset is expected to generate 1.01 times less return on investment than Vanguard FTSE. In addition to that, First Asset is 1.08 times more volatile than Vanguard FTSE Canada. It trades about 0.09 of its total potential returns per unit of risk. Vanguard FTSE Canada is currently generating about 0.1 per unit of volatility. If you would invest 4,089 in Vanguard FTSE Canada on August 28, 2024 and sell it today you would earn a total of 1,520 from holding Vanguard FTSE Canada or generate 37.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Asset Morningstar vs. Vanguard FTSE Canada
Performance |
| Timeline |
| First Asset Morningstar |
| Vanguard FTSE Canada |
First Asset and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Asset and Vanguard FTSE
The main advantage of trading using opposite First Asset and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Asset 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.| First Asset vs. iShares SPTSX 60 | First Asset vs. iShares Core SP | First Asset vs. iShares SPTSX Composite | First Asset vs. iShares Core MSCI |
| Vanguard FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard Total Market | 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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