Correlation Between Vanguard Conservative and Vanguard Canadian

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

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

Diversification Opportunities for Vanguard Conservative and Vanguard Canadian

0.66

Correlation Coefficient

Vanguard Conservative  Vanguard Canadian

Poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Conservative ETF and Vanguard Canadian Long Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Canadian Long and Vanguard Conservative 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 Vanguard Conservative ETF 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 Long has no effect on the direction of Vanguard Conservative i.e., Vanguard Conservative and Vanguard Canadian go up and down completely randomly.

Pair Corralation between Vanguard Conservative and Vanguard Canadian

Assuming the 90 days trading horizon Vanguard Conservative ETF is expected to under-perform the Vanguard Canadian. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Conservative ETF is 1.51 times less risky than Vanguard Canadian. The etf trades about -0.03 of its potential returns per unit of risk. The Vanguard Canadian Long Term is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,115  in Vanguard Canadian Long Term on December 23, 2024 and sell it today you would earn a total of  39.00  from holding Vanguard Canadian Long Term or generate 1.84% return on investment over 90 days.

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

Vanguard Conservative ETF  vs.  Vanguard Canadian Long Term

Vanguard Conservative ETF

Risk-Adjusted Performance

Very Weak

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

Vanguard Canadian Long

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Canadian Long Term are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, 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 Vanguard Conservative and Vanguard Canadian

The main advantage of trading using opposite Vanguard Conservative and Vanguard Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Conservative 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 Vanguard Conservative ETF and Vanguard Canadian Long 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.