Correlation Between Global X and IShares Canadian

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

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

Diversification Opportunities for Global X and IShares Canadian

0.94

Correlation Coefficient

Global X  IShares Canadian

Almost no diversification

The 3 months correlation between Global and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Global X SPTSX and iShares Canadian Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian Growth and Global X 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 Global X SPTSX 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 Growth has no effect on the direction of Global X i.e., Global X and IShares Canadian go up and down completely randomly.

Pair Corralation between Global X and IShares Canadian

Assuming the 90 days trading horizon Global X SPTSX is expected to generate 0.89 times more return on investment than IShares Canadian. However, Global X SPTSX is 1.12 times less risky than IShares Canadian. It trades about 0.03 of its potential returns per unit of risk. iShares Canadian Growth is currently generating about -0.01 per unit of risk. If you would invest  6,426  in Global X SPTSX on December 30, 2024 and sell it today you would earn a total of  85.00  from holding Global X SPTSX or generate 1.32% return on investment over 90 days.

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

Global X SPTSX  vs.  iShares Canadian Growth

Global X SPTSX

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global X SPTSX are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Canadian Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Canadian Growth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental 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 Global X and IShares Canadian

The main advantage of trading using opposite Global X and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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 Global X SPTSX and iShares Canadian Growth 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.