Correlation Between IShares Canadian and IShares Core
Can any of the company-specific risk be diversified away by investing in both IShares Canadian and IShares Core 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 IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Canadian Value and iShares Core Canadian, you can compare the effects of market volatilities on IShares Canadian and IShares Core 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 IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and IShares Core.
Diversification Opportunities for IShares Canadian and IShares Core
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and IShares is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Value and iShares Core Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Canadian 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 Value are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Canadian has no effect on the direction of IShares Canadian i.e., IShares Canadian and IShares Core go up and down completely randomly.
Pair Corralation between IShares Canadian and IShares Core
Assuming the 90 days trading horizon iShares Canadian Value is expected to generate 2.11 times more return on investment than IShares Core. However, IShares Canadian is 2.11 times more volatile than iShares Core Canadian. It trades about 0.16 of its potential returns per unit of risk. iShares Core Canadian is currently generating about 0.14 per unit of risk. If you would invest 2,898 in iShares Canadian Value on August 29, 2024 and sell it today you would earn a total of 1,090 from holding iShares Canadian Value or generate 37.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Canadian Value vs. iShares Core Canadian
Performance |
| Timeline |
| iShares Canadian Value |
| iShares Core Canadian |
IShares Canadian and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Canadian and IShares Core
The main advantage of trading using opposite IShares Canadian and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Canadian position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core's long position.| IShares Canadian vs. iShares Canadian Growth | IShares Canadian vs. iShares Canadian Government | IShares Canadian vs. iShares SPTSX Small | IShares Canadian vs. iShares SPTSX Completion |
| IShares Core vs. BMO Long Corporate | IShares Core vs. BMO Short Corporate | IShares Core vs. BMO High Yield | IShares Core vs. BMO Short Provincial |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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