Correlation Between American Funds and IShares Canadian
Can any of the company-specific risk be diversified away by investing in both American Funds and IShares Canadian 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 American Funds and IShares Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Fundamental and iShares Canadian Universe, you can compare the effects of market volatilities on American Funds and IShares Canadian 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 American Funds with a short position of IShares Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and IShares Canadian.
Diversification Opportunities for American Funds and IShares Canadian
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and IShares is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and iShares Canadian Universe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian Universe and American Funds 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 American Funds Fundamental are associated (or correlated) with IShares Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Canadian Universe has no effect on the direction of American Funds i.e., American Funds and IShares Canadian go up and down completely randomly.
Pair Corralation between American Funds and IShares Canadian
Assuming the 90 days horizon American Funds Fundamental is expected to generate 3.0 times more return on investment than IShares Canadian. However, American Funds is 3.0 times more volatile than iShares Canadian Universe. It trades about 0.06 of its potential returns per unit of risk. iShares Canadian Universe is currently generating about 0.08 per unit of risk. If you would invest 7,352 in American Funds Fundamental on November 3, 2024 and sell it today you would earn a total of 1,066 from holding American Funds Fundamental or generate 14.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
American Funds Fundamental vs. iShares Canadian Universe
Performance |
| Timeline |
| American Funds Funda |
| iShares Canadian Universe |
American Funds and IShares Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and IShares Canadian
The main advantage of trading using opposite American Funds and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, IShares Canadian 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 Canadian will offset losses from the drop in IShares Canadian's long position.| American Funds vs. Federated Emerging Market | American Funds vs. Siit Emerging Markets | American Funds vs. Mid Cap 15x Strategy | American Funds vs. Ashmore Emerging Markets |
| IShares Canadian vs. iShares Canadian Short | IShares Canadian vs. iShares MSCI EAFE | IShares Canadian vs. iShares Core Canadian | IShares Canadian vs. iShares Canadian Real |
Check out your portfolio center.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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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