Correlation Between IShares Canadian and Vanguard Canadian

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

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

Diversification Opportunities for IShares Canadian and Vanguard Canadian

0.98

Correlation Coefficient

IShares Canadian  Vanguard Canadian

Almost no diversification

The 3 months correlation between IShares and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Government and Vanguard Canadian Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Canadian and IShares 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 iShares Canadian Government are associated (or correlated) with Vanguard Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Canadian has no effect on the direction of IShares Canadian i.e., IShares Canadian and Vanguard Canadian go up and down completely randomly.

Pair Corralation between IShares Canadian and Vanguard Canadian

Assuming the 90 days trading horizon IShares Canadian is expected to generate 1.32 times less return on investment than Vanguard Canadian. But when comparing it to its historical volatility, iShares Canadian Government is 1.0 times less risky than Vanguard Canadian. It trades about 0.06 of its potential returns per unit of risk. Vanguard Canadian Aggregate is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,302  in Vanguard Canadian Aggregate on September 2, 2024 and sell it today you would earn a total of  46.00  from holding Vanguard Canadian Aggregate or generate 2.0% return on investment over 90 days.

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

iShares Canadian Government  vs.  Vanguard Canadian Aggregate

iShares Canadian Gov

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian Government are ranked lower than 5 (%) 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.

Vanguard Canadian

Risk-Adjusted Performance

6 of 100

Modest

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

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

The idea behind iShares Canadian Government and Vanguard Canadian Aggregate 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.