Correlation Between IShares Canadian and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both IShares Canadian and Vanguard 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 Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Canadian Select and Vanguard FTSE Canadian, you can compare the effects of market volatilities on IShares Canadian and Vanguard 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 Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and Vanguard FTSE.
Diversification Opportunities for IShares Canadian and Vanguard FTSE
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Select and Vanguard FTSE Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE 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 Select are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Canadian has no effect on the direction of IShares Canadian i.e., IShares Canadian and Vanguard FTSE go up and down completely randomly.
Pair Corralation between IShares Canadian and Vanguard FTSE
Assuming the 90 days trading horizon IShares Canadian is expected to generate 1.18 times less return on investment than Vanguard FTSE. But when comparing it to its historical volatility, iShares Canadian Select is 1.16 times less risky than Vanguard FTSE. It trades about 0.31 of its potential returns per unit of risk. Vanguard FTSE Canadian is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 4,920 in Vanguard FTSE Canadian on August 26, 2024 and sell it today you would earn a total of 172.00 from holding Vanguard FTSE Canadian or generate 3.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Canadian Select vs. Vanguard FTSE Canadian
Performance |
| Timeline |
| iShares Canadian Select |
| Vanguard FTSE Canadian |
IShares Canadian and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Canadian and Vanguard FTSE
The main advantage of trading using opposite IShares Canadian and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Canadian position performs unexpectedly, Vanguard 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 Vanguard FTSE will offset losses from the drop in Vanguard FTSE's long position.| IShares Canadian vs. iShares SPTSX Canadian | IShares Canadian vs. iShares Diversified Monthly | IShares Canadian vs. iShares SPTSX Capped | IShares Canadian vs. iShares SPTSX Capped |
| Vanguard FTSE vs. iShares Diversified Monthly | Vanguard FTSE vs. iShares SPTSX Capped | Vanguard FTSE vs. iShares SPTSX Capped |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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