Correlation Between IShares Canadian and Tech Leaders
Can any of the company-specific risk be diversified away by investing in both IShares Canadian and Tech Leaders 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 Tech Leaders 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 Tech Leaders Income, you can compare the effects of market volatilities on IShares Canadian and Tech Leaders 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 Tech Leaders. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and Tech Leaders.
Diversification Opportunities for IShares Canadian and Tech Leaders
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and Tech is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Universe and Tech Leaders Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tech Leaders Income 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 Tech Leaders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tech Leaders Income has no effect on the direction of IShares Canadian i.e., IShares Canadian and Tech Leaders go up and down completely randomly.
Pair Corralation between IShares Canadian and Tech Leaders
Assuming the 90 days trading horizon IShares Canadian is expected to generate 9.32 times less return on investment than Tech Leaders. But when comparing it to its historical volatility, iShares Canadian Universe is 2.73 times less risky than Tech Leaders. It trades about 0.03 of its potential returns per unit of risk. Tech Leaders Income is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,459 in Tech Leaders Income on August 25, 2024 and sell it today you would earn a total of 1,070 from holding Tech Leaders Income or generate 73.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Canadian Universe vs. Tech Leaders Income
Performance |
| Timeline |
| iShares Canadian Universe |
| Tech Leaders Income |
IShares Canadian and Tech Leaders Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Canadian and Tech Leaders
The main advantage of trading using opposite IShares Canadian and Tech Leaders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Canadian position performs unexpectedly, Tech Leaders 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 Tech Leaders will offset losses from the drop in Tech Leaders' long position.| IShares Canadian vs. Mackenzie Core Plus | IShares Canadian vs. Mackenzie Unconstrained Bond | IShares Canadian vs. Mackenzie Floating Rate | IShares Canadian vs. Mackenzie Canadian Aggregate |
| Tech Leaders vs. iShares SPTSX Capped | Tech Leaders vs. BMO Equal Weight | Tech Leaders vs. BMO Covered Call | Tech Leaders vs. BMO SPTSX Equal |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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