Correlation Between IShares Canadian and IShares Core

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

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

Diversification Opportunities for IShares Canadian and IShares Core

0.11

Correlation Coefficient

IShares Canadian  IShares Core

Average diversification

The 3 months correlation between IShares and IShares is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Value and iShares Core Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Canadian 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 Value are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Canadian has no effect on the direction of IShares Canadian i.e., IShares Canadian and IShares Core go up and down completely randomly.

Pair Corralation between IShares Canadian and IShares Core

Assuming the 90 days trading horizon iShares Canadian Value is expected to generate 0.76 times more return on investment than IShares Core. However, iShares Canadian Value is 1.32 times less risky than IShares Core. It trades about 0.18 of its potential returns per unit of risk. iShares Core Canadian is currently generating about -0.01 per unit of risk. If you would invest  3,753  in iShares Canadian Value on September 15, 2024 and sell it today you would earn a total of  229.00  from holding iShares Canadian Value or generate 6.1% return on investment over 90 days.

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

iShares Canadian Value  vs.  iShares Core Canadian

iShares Canadian Value

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian Value are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Core Canadian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core Canadian has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, IShares Core 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 IShares Core

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

The idea behind iShares Canadian Value and iShares Core Canadian 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.