Correlation Between Vanguard Canadian and Ninepoint Energy

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

By analyzing existing cross correlation between Vanguard Canadian Government and Ninepoint Energy Income, you can compare the effects of market volatilities on Vanguard Canadian and Ninepoint Energy 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 Ninepoint Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Canadian and Ninepoint Energy.

Diversification Opportunities for Vanguard Canadian and Ninepoint Energy

-0.54

Correlation Coefficient

Vanguard Canadian  Ninepoint Energy

Excellent diversification

The 3 months correlation between Vanguard and Ninepoint is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Canadian Government and Ninepoint Energy Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ninepoint Energy Income 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 Government are associated (or correlated) with Ninepoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ninepoint Energy Income has no effect on the direction of Vanguard Canadian i.e., Vanguard Canadian and Ninepoint Energy go up and down completely randomly.

Pair Corralation between Vanguard Canadian and Ninepoint Energy

Assuming the 90 days trading horizon Vanguard Canadian is expected to generate 2.76 times less return on investment than Ninepoint Energy. But when comparing it to its historical volatility, Vanguard Canadian Government is 3.55 times less risky than Ninepoint Energy. It trades about 0.05 of its potential returns per unit of risk. Ninepoint Energy Income is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,891  in Ninepoint Energy Income on September 4, 2024 and sell it today you would earn a total of  56.00  from holding Ninepoint Energy Income or generate 2.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Vanguard Canadian Government  vs.  Ninepoint Energy Income

Vanguard Canadian

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Canadian Government are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard Canadian is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Ninepoint Energy Income

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ninepoint Energy Income are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Ninepoint Energy is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard Canadian and Ninepoint Energy

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

The idea behind Vanguard Canadian Government and Ninepoint Energy Income 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.