Correlation Between IShares Canadian and Laurentian Bank
Can any of the company-specific risk be diversified away by investing in both IShares Canadian and Laurentian Bank 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 Laurentian Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Canadian HYBrid and Laurentian Bank, you can compare the effects of market volatilities on IShares Canadian and Laurentian Bank 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 Laurentian Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and Laurentian Bank.
Diversification Opportunities for IShares Canadian and Laurentian Bank
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Laurentian is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and Laurentian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laurentian Bank 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 HYBrid are associated (or correlated) with Laurentian Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laurentian Bank has no effect on the direction of IShares Canadian i.e., IShares Canadian and Laurentian Bank go up and down completely randomly.
Pair Corralation between IShares Canadian and Laurentian Bank
Assuming the 90 days trading horizon IShares Canadian is expected to generate 6.03 times less return on investment than Laurentian Bank. But when comparing it to its historical volatility, iShares Canadian HYBrid is 2.95 times less risky than Laurentian Bank. It trades about 0.26 of its potential returns per unit of risk. Laurentian Bank is currently generating about 0.54 of returns per unit of risk over similar time horizon. If you would invest 2,625 in Laurentian Bank on September 2, 2024 and sell it today you would earn a total of 340.00 from holding Laurentian Bank or generate 12.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Canadian HYBrid vs. Laurentian Bank
Performance |
| Timeline |
| iShares Canadian HYBrid |
| Laurentian Bank |
IShares Canadian and Laurentian Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Canadian and Laurentian Bank
The main advantage of trading using opposite IShares Canadian and Laurentian Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Canadian position performs unexpectedly, Laurentian Bank 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 Laurentian Bank will offset losses from the drop in Laurentian Bank's long position.| IShares Canadian vs. iShares IG Corporate | IShares Canadian vs. iShares High Yield | IShares Canadian vs. iShares Floating Rate | IShares Canadian vs. iShares JP Morgan |
| Laurentian Bank vs. Canadian Western Bank | Laurentian Bank vs. National Bank of | Laurentian Bank vs. Canadian Imperial Bank | Laurentian Bank vs. Great West Lifeco |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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