Correlation Between Vanguard and Mackenzie Large

Can any of the company-specific risk be diversified away by investing in both Vanguard and Mackenzie Large 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 Mackenzie Large 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 Mackenzie Large Cap, you can compare the effects of market volatilities on Vanguard and Mackenzie Large 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 Mackenzie Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Mackenzie Large.

Diversification Opportunities for Vanguard and Mackenzie Large

0.97

Correlation Coefficient

Vanguard  Mackenzie Large

Almost no diversification

The 3 months correlation between Vanguard and Mackenzie is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Mackenzie Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie Large Cap 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 Mackenzie Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie Large Cap has no effect on the direction of Vanguard i.e., Vanguard and Mackenzie Large go up and down completely randomly.

Pair Corralation between Vanguard and Mackenzie Large

Assuming the 90 days trading horizon Vanguard is expected to generate 1.46 times less return on investment than Mackenzie Large. But when comparing it to its historical volatility, Vanguard SP 500 is 1.06 times less risky than Mackenzie Large. It trades about 0.21 of its potential returns per unit of risk. Mackenzie Large Cap is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  21,364  in Mackenzie Large Cap on September 3, 2024 and sell it today you would earn a total of  3,073  from holding Mackenzie Large Cap or generate 14.38% return on investment over 90 days.

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

Vanguard SP 500  vs.  Mackenzie Large Cap

Vanguard SP 500

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mackenzie Large Cap

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mackenzie Large Cap are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Mackenzie Large displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard and Mackenzie Large

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

The idea behind Vanguard SP 500 and Mackenzie Large Cap 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.