Correlation Between IShares Canadian and Mackenzie Government

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

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

Diversification Opportunities for IShares Canadian and Mackenzie Government

0.67

Correlation Coefficient

IShares Canadian  Mackenzie Government

Poor diversification

The 3 months correlation between IShares and Mackenzie is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Universe and Mackenzie Government Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie Government Long and IShares Canadian 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 iShares Canadian Universe are associated (or correlated) with Mackenzie Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie Government Long has no effect on the direction of IShares Canadian i.e., IShares Canadian and Mackenzie Government go up and down completely randomly.

Pair Corralation between IShares Canadian and Mackenzie Government

Assuming the 90 days trading horizon iShares Canadian Universe is expected to generate 0.53 times more return on investment than Mackenzie Government. However, iShares Canadian Universe is 1.9 times less risky than Mackenzie Government. It trades about 0.0 of its potential returns per unit of risk. Mackenzie Government Long is currently generating about -0.07 per unit of risk. If you would invest  2,856  in iShares Canadian Universe on September 14, 2024 and sell it today you would lose (2.00) from holding iShares Canadian Universe or give up 0.07% of portfolio value over 90 days.

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

iShares Canadian Universe  vs.  Mackenzie Government Long

iShares Canadian Universe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Canadian Universe has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Mackenzie Government Long

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares Canadian and Mackenzie Government

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

The idea behind iShares Canadian Universe and Mackenzie Government Long 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.