Correlation Between Helios Fairfax and IShares Canadian

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

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

Diversification Opportunities for Helios Fairfax and IShares Canadian

0.45

Correlation Coefficient

Helios Fairfax  IShares Canadian

Very weak diversification

The 3 months correlation between Helios and IShares is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Helios Fairfax Partners and iShares Canadian HYBrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian HYBrid and Helios Fairfax 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 Helios Fairfax Partners 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 HYBrid has no effect on the direction of Helios Fairfax i.e., Helios Fairfax and IShares Canadian go up and down completely randomly.

Pair Corralation between Helios Fairfax and IShares Canadian

Assuming the 90 days trading horizon Helios Fairfax Partners is expected to generate 10.2 times more return on investment than IShares Canadian. However, Helios Fairfax is 10.2 times more volatile than iShares Canadian HYBrid. It trades about 0.08 of its potential returns per unit of risk. iShares Canadian HYBrid is currently generating about 0.19 per unit of risk. If you would invest  250.00  in Helios Fairfax Partners on September 2, 2024 and sell it today you would earn a total of  30.00  from holding Helios Fairfax Partners or generate 12.0% return on investment over 90 days.

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

Helios Fairfax Partners  vs.  iShares Canadian HYBrid

Helios Fairfax Partners

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Helios Fairfax Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Helios Fairfax sustained solid returns over the last few months and may actually be approaching a breakup point.

iShares Canadian HYBrid

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian HYBrid are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, 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 Helios Fairfax and IShares Canadian

The main advantage of trading using opposite Helios Fairfax and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Helios Fairfax 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 Helios Fairfax Partners and iShares Canadian HYBrid 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.