Correlation Between Global X and Vanguard Canadian

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

By analyzing existing cross correlation between Global X Active and Vanguard Canadian Short Term, you can compare the effects of market volatilities on Global X and Vanguard Canadian 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 Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Vanguard Canadian.

Diversification Opportunities for Global X and Vanguard Canadian

0.92

Correlation Coefficient

Global X  Vanguard Canadian

Almost no diversification

The 3 months correlation between Global and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Global X Active and Vanguard Canadian Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Canadian Short 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 Active are associated (or correlated) with Vanguard Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Canadian Short has no effect on the direction of Global X i.e., Global X and Vanguard Canadian go up and down completely randomly.

Pair Corralation between Global X and Vanguard Canadian

Assuming the 90 days trading horizon Global X is expected to generate 1.77 times less return on investment than Vanguard Canadian. But when comparing it to its historical volatility, Global X Active is 1.84 times less risky than Vanguard Canadian. It trades about 0.19 of its potential returns per unit of risk. Vanguard Canadian Short Term is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,388  in Vanguard Canadian Short Term on December 30, 2024 and sell it today you would earn a total of  38.00  from holding Vanguard Canadian Short Term or generate 1.59% return on investment over 90 days.

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

Global X Active  vs.  Vanguard Canadian Short Term

Global X Active

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Active are ranked lower than 14 (%) 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 Canadian Short

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Canadian Short Term are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Vanguard Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Global X and Vanguard Canadian

The main advantage of trading using opposite Global X and Vanguard Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, Vanguard Canadian 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 Canadian will offset losses from the drop in Vanguard Canadian's long position.

The idea behind Global X Active and Vanguard Canadian Short Term 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.