Correlation Between CI Canada and Mackenzie TIPS

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

By analyzing existing cross correlation between CI Canada Lifeco and Mackenzie TIPS Index, you can compare the effects of market volatilities on CI Canada and Mackenzie TIPS 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 CI Canada with a short position of Mackenzie TIPS. Check out your portfolio center. Please also check ongoing floating volatility patterns of CI Canada and Mackenzie TIPS.

Diversification Opportunities for CI Canada and Mackenzie TIPS

0.79

Correlation Coefficient

CI Canada  Mackenzie TIPS

Poor diversification

The 3 months correlation between FLI and Mackenzie is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding CI Canada Lifeco and Mackenzie TIPS Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie TIPS Index and CI Canada 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 CI Canada Lifeco are associated (or correlated) with Mackenzie TIPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie TIPS Index has no effect on the direction of CI Canada i.e., CI Canada and Mackenzie TIPS go up and down completely randomly.

Pair Corralation between CI Canada and Mackenzie TIPS

Assuming the 90 days trading horizon CI Canada Lifeco is expected to generate 3.96 times more return on investment than Mackenzie TIPS. However, CI Canada is 3.96 times more volatile than Mackenzie TIPS Index. It trades about 0.08 of its potential returns per unit of risk. Mackenzie TIPS Index is currently generating about 0.18 per unit of risk. If you would invest  1,084  in CI Canada Lifeco on December 30, 2024 and sell it today you would earn a total of  61.00  from holding CI Canada Lifeco or generate 5.63% return on investment over 90 days.

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

CI Canada Lifeco  vs.  Mackenzie TIPS Index

CI Canada Lifeco

Risk-Adjusted Performance

Modest

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

Mackenzie TIPS Index

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mackenzie TIPS Index are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Mackenzie TIPS is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CI Canada and Mackenzie TIPS

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

The idea behind CI Canada Lifeco and Mackenzie TIPS Index 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.