Correlation Between Global X and IShares Canadian
Can any of the company-specific risk be diversified away by investing in both Global X 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 Global X and IShares Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Active and iShares Canadian Universe, you can compare the effects of market volatilities on Global X 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 Global X with a short position of IShares Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and IShares Canadian.
Diversification Opportunities for Global X and IShares Canadian
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Global X Active 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 Global X 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 Global X Active 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 Global X i.e., Global X and IShares Canadian go up and down completely randomly.
Pair Corralation between Global X and IShares Canadian
Assuming the 90 days trading horizon Global X Active is expected to under-perform the IShares Canadian. But the etf apears to be less risky and, when comparing its historical volatility, Global X Active is 1.27 times less risky than IShares Canadian. The etf trades about -0.25 of its potential returns per unit of risk. The iShares Canadian Universe is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 2,858 in iShares Canadian Universe on January 15, 2025 and sell it today you would lose (24.00) from holding iShares Canadian Universe or give up 0.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X Active vs. iShares Canadian Universe
Performance |
| Timeline |
| Global X Active |
| iShares Canadian Universe |
Global X and IShares Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and IShares Canadian
The main advantage of trading using opposite Global X and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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.The idea behind Global X Active and iShares Canadian Universe 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.| 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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