Correlation Between IShares 1 and CI Canadian

Can any of the company-specific risk be diversified away by investing in both IShares 1 and CI Canadian 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 1 and CI Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 1 10Yr Laddered and CI Canadian Convertible, you can compare the effects of market volatilities on IShares 1 and CI Canadian 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 1 with a short position of CI Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and CI Canadian.

Diversification Opportunities for IShares 1 and CI Canadian

-0.05

Correlation Coefficient

IShares 1  CI Canadian

Good diversification

The 3 months correlation between IShares and CXF is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 10Yr Laddered and CI Canadian Convertible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Canadian Convertible and IShares 1 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 1 10Yr Laddered are associated (or correlated) with CI Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Canadian Convertible has no effect on the direction of IShares 1 i.e., IShares 1 and CI Canadian go up and down completely randomly.

Pair Corralation between IShares 1 and CI Canadian

Assuming the 90 days trading horizon IShares 1 is expected to generate 1.5 times less return on investment than CI Canadian. But when comparing it to its historical volatility, iShares 1 10Yr Laddered is 3.51 times less risky than CI Canadian. It trades about 0.13 of its potential returns per unit of risk. CI Canadian Convertible is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  913.00  in CI Canadian Convertible on December 2, 2024 and sell it today you would earn a total of  101.00  from holding CI Canadian Convertible or generate 11.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

iShares 1 10Yr Laddered  vs.  CI Canadian Convertible

iShares 1 10Yr

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 1 10Yr Laddered are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, IShares 1 is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

CI Canadian Convertible

Risk-Adjusted Performance

Very Weak

Over the last 90 days CI Canadian Convertible has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, CI Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares 1 and CI Canadian

The main advantage of trading using opposite IShares 1 and CI Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 position performs unexpectedly, CI Canadian 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 CI Canadian will offset losses from the drop in CI Canadian's long position.

The idea behind iShares 1 10Yr Laddered and CI Canadian Convertible pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.