Correlation Between IShares 1 and IShares Canadian
Can any of the company-specific risk be diversified away by investing in both IShares 1 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 IShares 1 and IShares Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares 1 5 Year and iShares Canadian Short, you can compare the effects of market volatilities on IShares 1 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 IShares 1 with a short position of IShares Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and IShares Canadian.
Diversification Opportunities for IShares 1 and IShares Canadian
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 5 Year and iShares Canadian Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian Short and IShares 1 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 1 5 Year 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 Short has no effect on the direction of IShares 1 i.e., IShares 1 and IShares Canadian go up and down completely randomly.
Pair Corralation between IShares 1 and IShares Canadian
Assuming the 90 days trading horizon IShares 1 is expected to generate 2.0 times less return on investment than IShares Canadian. In addition to that, IShares 1 is 1.15 times more volatile than iShares Canadian Short. It trades about 0.02 of its total potential returns per unit of risk. iShares Canadian Short is currently generating about 0.04 per unit of volatility. If you would invest 2,663 in iShares Canadian Short on August 30, 2024 and sell it today you would earn a total of 3.00 from holding iShares Canadian Short or generate 0.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
iShares 1 5 Year vs. iShares Canadian Short
Performance |
| Timeline |
| iShares 1 5 |
| iShares Canadian Short |
IShares 1 and IShares Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares 1 and IShares Canadian
The main advantage of trading using opposite IShares 1 and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 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.| IShares 1 vs. iShares 1 5 Year | IShares 1 vs. iShares Premium Money | IShares 1 vs. iShares Canadian Government | IShares 1 vs. iShares Global Monthly |
| IShares Canadian vs. iShares Canadian Universe | IShares Canadian vs. iShares Canadian Real | IShares Canadian vs. iShares Core Canadian | IShares Canadian vs. iShares Core Canadian |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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