Correlation Between Brompton Sustainable and Vanguard FTSE

Can any of the company-specific risk be diversified away by investing in both Brompton Sustainable 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 Brompton Sustainable and Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brompton Sustainable Real and Vanguard FTSE Canada, you can compare the effects of market volatilities on Brompton Sustainable 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 Brompton Sustainable with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton Sustainable and Vanguard FTSE.

Diversification Opportunities for Brompton Sustainable and Vanguard FTSE

0.61

Correlation Coefficient

Brompton Sustainable  Vanguard FTSE

Poor diversification

The 3 months correlation between Brompton and Vanguard is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Brompton Sustainable Real 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 Brompton Sustainable 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 Brompton Sustainable Real 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 Brompton Sustainable i.e., Brompton Sustainable and Vanguard FTSE go up and down completely randomly.

Pair Corralation between Brompton Sustainable and Vanguard FTSE

Assuming the 90 days trading horizon Brompton Sustainable Real is expected to generate 1.37 times more return on investment than Vanguard FTSE. However, Brompton Sustainable is 1.37 times more volatile than Vanguard FTSE Canada. It trades about 0.12 of its potential returns per unit of risk. Vanguard FTSE Canada is currently generating about 0.14 per unit of risk. If you would invest  2,157  in Brompton Sustainable Real on October 7, 2024 and sell it today you would earn a total of  545.00  from holding Brompton Sustainable Real or generate 25.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Brompton Sustainable Real  vs.  Vanguard FTSE Canada

Brompton Sustainable Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brompton Sustainable Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Brompton Sustainable is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Vanguard FTSE Canada

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Canada are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard FTSE is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Brompton Sustainable and Vanguard FTSE

The main advantage of trading using opposite Brompton Sustainable and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brompton Sustainable 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.

The idea behind Brompton Sustainable Real and Vanguard FTSE Canada pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.