Correlation Between North American and IShares Canadian
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and IShares Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Financial and iShares Canadian HYBrid, you can compare the effects of market volatilities on North American 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 North American with a short position of IShares Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and IShares Canadian.
Diversification Opportunities for North American and IShares Canadian
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between North and IShares is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding North American Financial and iShares Canadian HYBrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian HYBrid and North American 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 North American Financial 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 HYBrid has no effect on the direction of North American i.e., North American and IShares Canadian go up and down completely randomly.
Pair Corralation between North American and IShares Canadian
Assuming the 90 days trading horizon North American Financial is expected to generate 5.99 times more return on investment than IShares Canadian. However, North American is 5.99 times more volatile than iShares Canadian HYBrid. It trades about 0.38 of its potential returns per unit of risk. iShares Canadian HYBrid is currently generating about 0.04 per unit of risk. If you would invest 593.00 in North American Financial on August 31, 2024 and sell it today you would earn a total of 165.00 from holding North American Financial or generate 27.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Financial vs. iShares Canadian HYBrid
Performance |
| Timeline |
| North American Financial |
| iShares Canadian HYBrid |
North American and IShares Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and IShares Canadian
The main advantage of trading using opposite North American and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. iShares Canadian HYBrid | North American vs. Brompton European Dividend | North American vs. Solar Alliance Energy | North American vs. PHN Multi Style All Cap |
| IShares Canadian vs. iShares IG Corporate | IShares Canadian vs. iShares High Yield | IShares Canadian vs. iShares Floating Rate | IShares Canadian vs. iShares JP Morgan |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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