Correlation Between IShares Canadian and Invesco FTSE
Can any of the company-specific risk be diversified away by investing in both IShares Canadian and Invesco FTSE 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 Canadian and Invesco FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Canadian Universe and Invesco FTSE RAFI, you can compare the effects of market volatilities on IShares Canadian and Invesco FTSE 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 Canadian with a short position of Invesco FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and Invesco FTSE.
Diversification Opportunities for IShares Canadian and Invesco FTSE
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and Invesco is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Universe and Invesco FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE RAFI and IShares Canadian 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 Canadian Universe are associated (or correlated) with Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE RAFI has no effect on the direction of IShares Canadian i.e., IShares Canadian and Invesco FTSE go up and down completely randomly.
Pair Corralation between IShares Canadian and Invesco FTSE
Assuming the 90 days trading horizon iShares Canadian Universe is expected to under-perform the Invesco FTSE. But the etf apears to be less risky and, when comparing its historical volatility, iShares Canadian Universe is 2.06 times less risky than Invesco FTSE. The etf trades about -0.05 of its potential returns per unit of risk. The Invesco FTSE RAFI is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 6,327 in Invesco FTSE RAFI on August 29, 2024 and sell it today you would earn a total of 306.00 from holding Invesco FTSE RAFI or generate 4.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.62% |
| Values | Daily Returns |
iShares Canadian Universe vs. Invesco FTSE RAFI
Performance |
| Timeline |
| iShares Canadian Universe |
| Invesco FTSE RAFI |
IShares Canadian and Invesco FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Canadian and Invesco FTSE
The main advantage of trading using opposite IShares Canadian and Invesco FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Canadian position performs unexpectedly, Invesco FTSE 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 Invesco FTSE will offset losses from the drop in Invesco FTSE's long position.| IShares Canadian vs. iShares Canadian Short | IShares Canadian vs. iShares MSCI EAFE | IShares Canadian vs. iShares Core Canadian | IShares Canadian vs. iShares Canadian Real |
| Invesco FTSE vs. iShares SPTSX 60 | Invesco FTSE vs. iShares Core SP | Invesco FTSE vs. iShares Core SPTSX | Invesco FTSE vs. BMO Aggregate Bond |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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