Correlation Between Financial and Vanguard Canadian

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

By analyzing existing cross correlation between Financial 15 Split and Vanguard Canadian Short Term, you can compare the effects of market volatilities on Financial 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 Financial with a short position of Vanguard Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Vanguard Canadian.

Diversification Opportunities for Financial and Vanguard Canadian

0.9

Correlation Coefficient

Financial  Vanguard Canadian

Almost no diversification

The 3 months correlation between Financial and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split 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 Financial 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 Financial 15 Split 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 Financial i.e., Financial and Vanguard Canadian go up and down completely randomly.

Pair Corralation between Financial and Vanguard Canadian

Assuming the 90 days trading horizon Financial 15 Split is expected to generate 7.25 times more return on investment than Vanguard Canadian. However, Financial is 7.25 times more volatile than Vanguard Canadian Short Term. It trades about 0.51 of its potential returns per unit of risk. Vanguard Canadian Short Term is currently generating about 0.16 per unit of risk. If you would invest  778.00  in Financial 15 Split on April 24, 2025 and sell it today you would earn a total of  216.00  from holding Financial 15 Split or generate 27.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Financial 15 Split  vs.  Vanguard Canadian Short Term

Financial 15 Split

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 40 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

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 12 (%) 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 Financial and Vanguard Canadian

The main advantage of trading using opposite Financial and Vanguard Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial 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 Financial 15 Split 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.