Correlation Between Dynamic Active and Vanguard FTSE

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

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

Diversification Opportunities for Dynamic Active and Vanguard FTSE

0.74

Correlation Coefficient

Dynamic Active  Vanguard FTSE

Poor diversification

The 3 months correlation between Dynamic and Vanguard is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Active Canadian and Vanguard FTSE Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Canadian and Dynamic Active 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 Dynamic Active Canadian 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 Canadian has no effect on the direction of Dynamic Active i.e., Dynamic Active and Vanguard FTSE go up and down completely randomly.

Pair Corralation between Dynamic Active and Vanguard FTSE

Assuming the 90 days trading horizon Dynamic Active Canadian is expected to generate 0.55 times more return on investment than Vanguard FTSE. However, Dynamic Active Canadian is 1.83 times less risky than Vanguard FTSE. It trades about -0.07 of its potential returns per unit of risk. Vanguard FTSE Canadian is currently generating about -0.11 per unit of risk. If you would invest  3,883  in Dynamic Active Canadian on November 29, 2024 and sell it today you would lose (77.00) from holding Dynamic Active Canadian or give up 1.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Dynamic Active Canadian  vs.  Vanguard FTSE Canadian

Dynamic Active Canadian

Risk-Adjusted Performance

Very Weak

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

Vanguard FTSE Canadian

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard FTSE Canadian has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Dynamic Active and Vanguard FTSE

The main advantage of trading using opposite Dynamic Active and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynamic Active 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 Dynamic Active Canadian and Vanguard FTSE Canadian 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.