Correlation Between Desjardins and IShares Canadian

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

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

Diversification Opportunities for Desjardins and IShares Canadian

0.15

Correlation Coefficient

Desjardins  IShares Canadian

Average diversification

The 3 months correlation between Desjardins and IShares is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Desjardins RI Developed and iShares Canadian Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian Value and Desjardins 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 Desjardins RI Developed are associated (or correlated) with IShares Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Canadian Value has no effect on the direction of Desjardins i.e., Desjardins and IShares Canadian go up and down completely randomly.

Pair Corralation between Desjardins and IShares Canadian

Assuming the 90 days trading horizon Desjardins RI Developed is expected to generate 0.95 times more return on investment than IShares Canadian. However, Desjardins RI Developed is 1.05 times less risky than IShares Canadian. It trades about 0.08 of its potential returns per unit of risk. iShares Canadian Value is currently generating about 0.07 per unit of risk. If you would invest  1,830  in Desjardins RI Developed on October 5, 2024 and sell it today you would earn a total of  557.00  from holding Desjardins RI Developed or generate 30.44% return on investment over 90 days.

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

Desjardins RI Developed  vs.  iShares Canadian Value

Desjardins RI Developed

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins RI Developed are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Desjardins is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Canadian Value

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian Value are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares 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 Desjardins and IShares Canadian

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

The idea behind Desjardins RI Developed and iShares Canadian Value 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.