Correlation Between IShares Fundamental and Canso Credit

Can any of the company-specific risk be diversified away by investing in both IShares Fundamental and Canso Credit 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 Canso Credit 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 Canso Credit Trust, you can compare the effects of market volatilities on IShares Fundamental and Canso Credit 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 Canso Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Fundamental and Canso Credit.

Diversification Opportunities for IShares Fundamental and Canso Credit

0.04

Correlation Coefficient

IShares Fundamental  Canso Credit

Significant diversification

The 3 months correlation between IShares and Canso is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding iShares Fundamental Hedged and Canso Credit Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canso Credit Trust 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 Canso Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canso Credit Trust has no effect on the direction of IShares Fundamental i.e., IShares Fundamental and Canso Credit go up and down completely randomly.

Pair Corralation between IShares Fundamental and Canso Credit

Assuming the 90 days trading horizon iShares Fundamental Hedged is expected to generate 1.6 times more return on investment than Canso Credit. However, IShares Fundamental is 1.6 times more volatile than Canso Credit Trust. It trades about 0.11 of its potential returns per unit of risk. Canso Credit Trust is currently generating about 0.11 per unit of risk. If you would invest  4,286  in iShares Fundamental Hedged on October 5, 2024 and sell it today you would earn a total of  1,141  from holding iShares Fundamental Hedged or generate 26.62% 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.  Canso Credit Trust

iShares Fundamental

Risk-Adjusted Performance

1 of 100

Very 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.

Canso Credit Trust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canso Credit Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Canso Credit is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Fundamental and Canso Credit

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

The idea behind iShares Fundamental Hedged and Canso Credit Trust 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.