Correlation Between Desjardins and Vanguard FTSE

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

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

Diversification Opportunities for Desjardins and Vanguard FTSE

0.83

Correlation Coefficient

Desjardins  Vanguard FTSE

Very poor diversification

The 3 months correlation between Desjardins and Vanguard is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Desjardins RI USA 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 Desjardins 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 Desjardins RI USA 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 Desjardins i.e., Desjardins and Vanguard FTSE go up and down completely randomly.

Pair Corralation between Desjardins and Vanguard FTSE

Assuming the 90 days trading horizon Desjardins RI USA is expected to generate 1.13 times more return on investment than Vanguard FTSE. However, Desjardins is 1.13 times more volatile than Vanguard FTSE Canada. It trades about 0.18 of its potential returns per unit of risk. Vanguard FTSE Canada is currently generating about 0.15 per unit of risk. If you would invest  3,054  in Desjardins RI USA on October 6, 2024 and sell it today you would earn a total of  1,529  from holding Desjardins RI USA or generate 50.07% return on investment over 90 days.

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

Desjardins RI USA  vs.  Vanguard FTSE Canada

Desjardins RI USA

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins RI USA are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Desjardins displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Desjardins and Vanguard FTSE

The main advantage of trading using opposite Desjardins and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Desjardins 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 Desjardins RI USA 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.