Correlation Between North American and IShares Canadian

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

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

Diversification Opportunities for North American and IShares Canadian

-0.49

Correlation Coefficient

North American  IShares Canadian

Very good diversification

The 3 months correlation between North and IShares is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding North American Financial and iShares Canadian HYBrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian HYBrid and North American 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 North American Financial 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 HYBrid has no effect on the direction of North American i.e., North American and IShares Canadian go up and down completely randomly.

Pair Corralation between North American and IShares Canadian

Assuming the 90 days trading horizon North American Financial is expected to under-perform the IShares Canadian. In addition to that, North American is 7.44 times more volatile than iShares Canadian HYBrid. It trades about -0.07 of its total potential returns per unit of risk. iShares Canadian HYBrid is currently generating about 0.08 per unit of volatility. If you would invest  1,960  in iShares Canadian HYBrid on December 30, 2024 and sell it today you would earn a total of  29.00  from holding iShares Canadian HYBrid or generate 1.48% return on investment over 90 days.

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

North American Financial  vs.  iShares Canadian HYBrid

North American Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days North American Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

iShares Canadian HYBrid

Risk-Adjusted Performance

Modest

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

The main advantage of trading using opposite North American and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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 North American Financial and iShares Canadian HYBrid 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 CEOs Directory module to screen CEOs from public companies around the world.