Correlation Between Global X and Vanguard FTSE

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

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

Diversification Opportunities for Global X and Vanguard FTSE

-0.04

Correlation Coefficient

Global X  Vanguard FTSE

Good diversification

The 3 months correlation between Global and Vanguard is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Global X Canadian and Vanguard FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Developed and Global X 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 Global X 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 Developed has no effect on the direction of Global X i.e., Global X and Vanguard FTSE go up and down completely randomly.

Pair Corralation between Global X and Vanguard FTSE

Assuming the 90 days trading horizon Global X is expected to generate 1.92 times less return on investment than Vanguard FTSE. In addition to that, Global X is 1.17 times more volatile than Vanguard FTSE Developed. It trades about 0.1 of its total potential returns per unit of risk. Vanguard FTSE Developed is currently generating about 0.22 per unit of volatility. If you would invest  3,534  in Vanguard FTSE Developed on December 30, 2024 and sell it today you would earn a total of  424.00  from holding Vanguard FTSE Developed or generate 12.0% return on investment over 90 days.

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

Global X Canadian  vs.  Vanguard FTSE Developed

Global X Canadian

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Canadian are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Vanguard FTSE Developed

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Developed are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Global X and Vanguard FTSE

The main advantage of trading using opposite Global X and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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 Global X Canadian and Vanguard FTSE Developed 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.