Correlation Between IShares Canadian and Prime Dividend

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

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

Diversification Opportunities for IShares Canadian and Prime Dividend

0.69

Correlation Coefficient

IShares Canadian  Prime Dividend

Poor diversification

The 3 months correlation between IShares and Prime is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and Prime Dividend Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Dividend Corp 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 HYBrid are associated (or correlated) with Prime Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Dividend Corp has no effect on the direction of IShares Canadian i.e., IShares Canadian and Prime Dividend go up and down completely randomly.

Pair Corralation between IShares Canadian and Prime Dividend

Assuming the 90 days trading horizon IShares Canadian is expected to generate 9.53 times less return on investment than Prime Dividend. But when comparing it to its historical volatility, iShares Canadian HYBrid is 5.96 times less risky than Prime Dividend. It trades about 0.16 of its potential returns per unit of risk. Prime Dividend Corp is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  665.00  in Prime Dividend Corp on September 5, 2024 and sell it today you would earn a total of  198.00  from holding Prime Dividend Corp or generate 29.77% return on investment over 90 days.

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

iShares Canadian HYBrid  vs.  Prime Dividend Corp

iShares Canadian HYBrid

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian HYBrid are ranked lower than 12 (%) 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.

Prime Dividend Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Dividend Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Prime Dividend displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Canadian and Prime Dividend

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

The idea behind iShares Canadian HYBrid and Prime Dividend Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.