Correlation Between IShares Core and Desjardins

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

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

Diversification Opportunities for IShares Core and Desjardins

0.62

Correlation Coefficient

IShares Core  Desjardins

Poor diversification

The 3 months correlation between IShares and Desjardins is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Canadian and Desjardins RI Active in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins RI Active and IShares Core 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 Core Canadian are associated (or correlated) with Desjardins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins RI Active has no effect on the direction of IShares Core i.e., IShares Core and Desjardins go up and down completely randomly.

Pair Corralation between IShares Core and Desjardins

Assuming the 90 days trading horizon IShares Core is expected to generate 1.52 times less return on investment than Desjardins. But when comparing it to its historical volatility, iShares Core Canadian is 2.25 times less risky than Desjardins. It trades about 0.21 of its potential returns per unit of risk. Desjardins RI Active is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,884  in Desjardins RI Active on September 9, 2024 and sell it today you would earn a total of  24.00  from holding Desjardins RI Active or generate 1.27% return on investment over 90 days.

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

iShares Core Canadian  vs.  Desjardins RI Active

iShares Core Canadian

Risk-Adjusted Performance

14 of 100

Good

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

Desjardins RI Active

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins RI Active are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Desjardins 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 Core and Desjardins

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

The idea behind iShares Core Canadian and Desjardins RI Active 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.