It should work great

The AUD/CAD just became free to hold. This means I can hold three differernt currency pairs and cancel all their price movements out. I'll be buying the AUD/USD and the USD/CAD and selling the CAD/AUD.

I took some measurements on the AUD$/$CAD portfolio and compared them to the AUD/CAD.

The long term correlation is usually strong but it broke down for two years early in the decade. For a while though, it was steady around -98%. Currently the 12 month, 6 month, and 3 month correlations are -91%, -86%, and -63%

You can see that the value of the portfolio declined from 2002 until 2005, the same time that the long term correlations fell apart and then flattened out like it should afterwards. This highlights the main risk to this type of trade.

The final chart is the distribution of values. You can see that the CAD/AUD is almost a mirror image of the AUD$/$CAD because of the distribution shifts left.

Based on one day value swings over the last two years, there is a 0.1% chance of loosing over $490 with this trade. Likewise, there is a 50% chance of no change in value and a 0.1% chance of gaining over $510.