Correlation Between IShares Canadian and IShares Small

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

By analyzing existing cross correlation between iShares Canadian Growth and iShares Small Cap, you can compare the effects of market volatilities on IShares Canadian and IShares Small 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 IShares Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and IShares Small.

Diversification Opportunities for IShares Canadian and IShares Small

0.92

Correlation Coefficient

IShares Canadian  IShares Small

Almost no diversification

The 3 months correlation between IShares and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Growth and iShares Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Small Cap 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 Growth are associated (or correlated) with IShares Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Small Cap has no effect on the direction of IShares Canadian i.e., IShares Canadian and IShares Small go up and down completely randomly.

Pair Corralation between IShares Canadian and IShares Small

Assuming the 90 days trading horizon iShares Canadian Growth is expected to generate 0.57 times more return on investment than IShares Small. However, iShares Canadian Growth is 1.75 times less risky than IShares Small. It trades about 0.3 of its potential returns per unit of risk. iShares Small Cap is currently generating about 0.16 per unit of risk. If you would invest  5,097  in iShares Canadian Growth on September 2, 2024 and sell it today you would earn a total of  757.00  from holding iShares Canadian Growth or generate 14.85% return on investment over 90 days.

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

iShares Canadian Growth  vs.  iShares Small Cap

iShares Canadian Growth

Risk-Adjusted Performance

23 of 100

Solid

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

iShares Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Small Cap are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares Small displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Canadian and IShares Small

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

The idea behind iShares Canadian Growth and iShares Small Cap 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.