The correlation between risk and return of Canadian mutual funds based on VAR

Abstract

This paper uses VAR to measure the risk of Canadian mutual funds and to determine the correlation between the risk. And I built two equations to do the analysis. I use Equation 3.2 to expose the correlation between the return and the potential loss of mutual funds which can be illustrated on the coefficient [beta][subscript 1]. This equation will also expose whether the previous risk still has influence on the mutual fund returns, what the correlations are, and how long this influence will last. This information will illustrated on the coefficient [beta][subscript 2], [beta][subscript 3] and [beta][subscript 4]. In Equation 3.3, the coefficient [beta][subscript 1] will illustrate the risk of the mutual fund and which kind of risk management can improve the mutual fund returns.