Correlation Between IShares Fundamental and Royal Canadian

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

By analyzing existing cross correlation between iShares Fundamental Hedged and Royal Canadian Mint, you can compare the effects of market volatilities on IShares Fundamental and Royal 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 Fundamental with a short position of Royal Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Fundamental and Royal Canadian.

Diversification Opportunities for IShares Fundamental and Royal Canadian

0.11

Correlation Coefficient

IShares Fundamental  Royal Canadian

Average diversification

The 3 months correlation between IShares and Royal is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding iShares Fundamental Hedged and Royal Canadian Mint in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Canadian Mint and IShares Fundamental 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 Fundamental Hedged are associated (or correlated) with Royal Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Canadian Mint has no effect on the direction of IShares Fundamental i.e., IShares Fundamental and Royal Canadian go up and down completely randomly.

Pair Corralation between IShares Fundamental and Royal Canadian

Assuming the 90 days trading horizon iShares Fundamental Hedged is expected to under-perform the Royal Canadian. But the etf apears to be less risky and, when comparing its historical volatility, iShares Fundamental Hedged is 1.24 times less risky than Royal Canadian. The etf trades about -0.3 of its potential returns per unit of risk. The Royal Canadian Mint is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,805  in Royal Canadian Mint on September 25, 2024 and sell it today you would earn a total of  111.00  from holding Royal Canadian Mint or generate 2.92% return on investment over 90 days.

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

iShares Fundamental Hedged  vs.  Royal Canadian Mint

iShares Fundamental

Risk-Adjusted Performance

1 of 100

Weak

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

Royal Canadian Mint

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Canadian Mint are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Royal Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Fundamental and Royal Canadian

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

The idea behind iShares Fundamental Hedged and Royal Canadian Mint 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.