Correlation Between Mackenzie Large and IShares Canadian

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

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

Diversification Opportunities for Mackenzie Large and IShares Canadian

0.96

Correlation Coefficient

Mackenzie Large  IShares Canadian

Almost no diversification

The 3 months correlation between Mackenzie and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Mackenzie Large Cap and iShares Canadian Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian Value and Mackenzie Large 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 Mackenzie Large Cap 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 Value has no effect on the direction of Mackenzie Large i.e., Mackenzie Large and IShares Canadian go up and down completely randomly.

Pair Corralation between Mackenzie Large and IShares Canadian

Assuming the 90 days trading horizon Mackenzie Large Cap is expected to generate 1.37 times more return on investment than IShares Canadian. However, Mackenzie Large is 1.37 times more volatile than iShares Canadian Value. It trades about 0.3 of its potential returns per unit of risk. iShares Canadian Value is currently generating about 0.25 per unit of risk. If you would invest  21,737  in Mackenzie Large Cap on September 12, 2024 and sell it today you would earn a total of  3,143  from holding Mackenzie Large Cap or generate 14.46% return on investment over 90 days.

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

Mackenzie Large Cap  vs.  iShares Canadian Value

Mackenzie Large Cap

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mackenzie Large Cap are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Mackenzie Large displayed solid returns over the last few months and may actually be approaching a breakup point.

iShares Canadian Value

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian Value are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mackenzie Large and IShares Canadian

The main advantage of trading using opposite Mackenzie Large and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mackenzie Large 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 Mackenzie Large Cap and iShares Canadian Value 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.