Correlation Between IShares Canadian and Aston Bay

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

By analyzing existing cross correlation between iShares Canadian HYBrid and Aston Bay Holdings, you can compare the effects of market volatilities on IShares Canadian and Aston Bay 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 Aston Bay. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and Aston Bay.

Diversification Opportunities for IShares Canadian and Aston Bay

-0.46

Correlation Coefficient

IShares Canadian  Aston Bay

Very good diversification

The 3 months correlation between IShares and Aston is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and Aston Bay Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aston Bay Holdings 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 HYBrid are associated (or correlated) with Aston Bay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aston Bay Holdings has no effect on the direction of IShares Canadian i.e., IShares Canadian and Aston Bay go up and down completely randomly.

Pair Corralation between IShares Canadian and Aston Bay

Assuming the 90 days trading horizon IShares Canadian is expected to generate 1.53 times less return on investment than Aston Bay. But when comparing it to its historical volatility, iShares Canadian HYBrid is 24.44 times less risky than Aston Bay. It trades about 0.11 of its potential returns per unit of risk. Aston Bay Holdings is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Aston Bay Holdings on December 21, 2024 and sell it today you would lose (0.50) from holding Aston Bay Holdings or give up 10.0% of portfolio value over 90 days.

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

iShares Canadian HYBrid  vs.  Aston Bay Holdings

iShares Canadian HYBrid

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian HYBrid are ranked lower than 8 (%) 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.

Aston Bay Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aston Bay Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Aston Bay is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Canadian and Aston Bay

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

The idea behind iShares Canadian HYBrid and Aston Bay Holdings 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.