Correlation Between Vanguard Canadian and Vanguard

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

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

Diversification Opportunities for Vanguard Canadian and Vanguard

-0.35

Correlation Coefficient

Vanguard Canadian  Vanguard

Very good diversification

The 3 months correlation between Vanguard and Vanguard is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Canadian Long Term and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 and Vanguard Canadian 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 Canadian Long Term are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of Vanguard Canadian i.e., Vanguard Canadian and Vanguard go up and down completely randomly.

Pair Corralation between Vanguard Canadian and Vanguard

Assuming the 90 days trading horizon Vanguard Canadian Long Term is expected to under-perform the Vanguard. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Canadian Long Term is 1.39 times less risky than Vanguard. The etf trades about -0.04 of its potential returns per unit of risk. The Vanguard SP 500 is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  8,298  in Vanguard SP 500 on April 20, 2025 and sell it today you would earn a total of  1,780  from holding Vanguard SP 500 or generate 21.45% return on investment over 90 days.

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

Vanguard Canadian Long Term  vs.  Vanguard SP 500

Vanguard Canadian Long

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Canadian Long Term has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Vanguard SP 500

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Canadian and Vanguard

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

The idea behind Vanguard Canadian Long Term and Vanguard SP 500 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.