Correlation Between IShares Core and CI Yield

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

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

Diversification Opportunities for IShares Core and CI Yield

0.66

Correlation Coefficient

IShares Core  CI Yield

Poor diversification

The 3 months correlation between IShares and CAGG is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Canadian and CI Yield Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Yield Enhanced and IShares Core 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 iShares Core Canadian are associated (or correlated) with CI Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Yield Enhanced has no effect on the direction of IShares Core i.e., IShares Core and CI Yield go up and down completely randomly.

Pair Corralation between IShares Core and CI Yield

Assuming the 90 days trading horizon iShares Core Canadian is expected to generate 0.85 times more return on investment than CI Yield. However, iShares Core Canadian is 1.18 times less risky than CI Yield. It trades about 0.12 of its potential returns per unit of risk. CI Yield Enhanced is currently generating about 0.06 per unit of risk. If you would invest  1,993  in iShares Core Canadian on September 12, 2024 and sell it today you would earn a total of  44.00  from holding iShares Core Canadian or generate 2.21% return on investment over 90 days.

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

iShares Core Canadian  vs.  CI Yield Enhanced

iShares Core Canadian

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Canadian are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, IShares Core is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

CI Yield Enhanced

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with IShares Core and CI Yield

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

The idea behind iShares Core Canadian and CI Yield Enhanced 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.