Correlation Between IShares Canadian and Vanguard
Can any of the company-specific risk be diversified away by investing in both IShares Canadian and Vanguard 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 Vanguard 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 Vanguard SP 500, you can compare the effects of market volatilities on IShares Canadian and Vanguard 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 Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and Vanguard.
Diversification Opportunities for IShares Canadian and Vanguard
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Vanguard is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Universe and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 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 Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of IShares Canadian i.e., IShares Canadian and Vanguard go up and down completely randomly.
Pair Corralation between IShares Canadian and Vanguard
Assuming the 90 days trading horizon iShares Canadian Universe is expected to generate 0.58 times more return on investment than Vanguard. However, iShares Canadian Universe is 1.73 times less risky than Vanguard. It trades about 0.1 of its potential returns per unit of risk. Vanguard SP 500 is currently generating about -0.09 per unit of risk. If you would invest 2,838 in iShares Canadian Universe on November 27, 2024 and sell it today you would earn a total of 21.00 from holding iShares Canadian Universe or generate 0.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Canadian Universe vs. Vanguard SP 500
Performance |
| Timeline |
| iShares Canadian Universe |
| Vanguard SP 500 |
IShares Canadian and Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Canadian and Vanguard
The main advantage of trading using opposite IShares Canadian and Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Canadian position performs unexpectedly, Vanguard 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 Vanguard will offset losses from the drop in Vanguard'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 |
| Vanguard vs. Vanguard FTSE Canadian | Vanguard vs. Vanguard Growth Portfolio | Vanguard vs. Vanguard SP 500 | Vanguard vs. Vanguard FTSE Canada |
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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