Correlation Between Dynamic Active and IShares Canadian

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

By analyzing existing cross correlation between Dynamic Active Tactical and iShares Canadian Growth, you can compare the effects of market volatilities on Dynamic Active and IShares 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 Dynamic Active with a short position of IShares Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynamic Active and IShares Canadian.

Diversification Opportunities for Dynamic Active and IShares Canadian

0.1

Correlation Coefficient

Dynamic Active  IShares Canadian

Average diversification

The 3 months correlation between Dynamic and IShares is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Active Tactical and iShares Canadian Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian Growth and Dynamic Active 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 Dynamic Active Tactical are associated (or correlated) with IShares Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Canadian Growth has no effect on the direction of Dynamic Active i.e., Dynamic Active and IShares Canadian go up and down completely randomly.

Pair Corralation between Dynamic Active and IShares Canadian

Assuming the 90 days trading horizon Dynamic Active is expected to generate 4.22 times less return on investment than IShares Canadian. But when comparing it to its historical volatility, Dynamic Active Tactical is 1.74 times less risky than IShares Canadian. It trades about 0.04 of its potential returns per unit of risk. iShares Canadian Growth is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,979  in iShares Canadian Growth on September 24, 2024 and sell it today you would earn a total of  1,640  from holding iShares Canadian Growth or generate 41.22% return on investment over 90 days.

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

Dynamic Active Tactical  vs.  iShares Canadian Growth

Dynamic Active Tactical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dynamic Active Tactical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Dynamic Active is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Canadian Growth

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian Growth are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, IShares 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 Dynamic Active and IShares Canadian

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

The idea behind Dynamic Active Tactical and iShares Canadian Growth 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.