Correlation Between Vanguard and Desjardins American

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

By analyzing existing cross correlation between Vanguard SP 500 and Desjardins American Equity, you can compare the effects of market volatilities on Vanguard and Desjardins American 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 with a short position of Desjardins American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Desjardins American.

Diversification Opportunities for Vanguard and Desjardins American

1.0

Correlation Coefficient

Vanguard  Desjardins American

No risk reduction

The 3 months correlation between Vanguard and Desjardins is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Desjardins American Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins American and Vanguard 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 SP 500 are associated (or correlated) with Desjardins American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins American has no effect on the direction of Vanguard i.e., Vanguard and Desjardins American go up and down completely randomly.

Pair Corralation between Vanguard and Desjardins American

Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 0.94 times more return on investment than Desjardins American. However, Vanguard SP 500 is 1.06 times less risky than Desjardins American. It trades about -0.11 of its potential returns per unit of risk. Desjardins American Equity is currently generating about -0.11 per unit of risk. If you would invest  15,385  in Vanguard SP 500 on December 24, 2024 and sell it today you would lose (924.00) from holding Vanguard SP 500 or give up 6.01% of portfolio value over 90 days.

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

Vanguard SP 500  vs.  Desjardins American Equity

Vanguard SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Desjardins American

Risk-Adjusted Performance

Very Weak

Over the last 90 days Desjardins American Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic 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 Vanguard and Desjardins American

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

The idea behind Vanguard SP 500 and Desjardins American Equity 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.