Correlation Between Fidelity Canadian and IShares High

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

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

Diversification Opportunities for Fidelity Canadian and IShares High

0.71

Correlation Coefficient

Fidelity Canadian  IShares High

Poor diversification

The 3 months correlation between Fidelity and IShares is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Canadian High and iShares High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares High Dividend and Fidelity 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 Fidelity Canadian High are associated (or correlated) with IShares High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares High Dividend has no effect on the direction of Fidelity Canadian i.e., Fidelity Canadian and IShares High go up and down completely randomly.

Pair Corralation between Fidelity Canadian and IShares High

Assuming the 90 days trading horizon Fidelity Canadian High is expected to generate 0.45 times more return on investment than IShares High. However, Fidelity Canadian High is 2.21 times less risky than IShares High. It trades about 0.06 of its potential returns per unit of risk. iShares High Dividend is currently generating about -0.08 per unit of risk. If you would invest  2,982  in Fidelity Canadian High on October 6, 2024 and sell it today you would earn a total of  36.00  from holding Fidelity Canadian High or generate 1.21% return on investment over 90 days.

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

Fidelity Canadian High  vs.  iShares High Dividend

Fidelity Canadian High

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Canadian High are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Fidelity Canadian is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

iShares High Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fidelity Canadian and IShares High

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

The idea behind Fidelity Canadian High and iShares High Dividend 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.