Correlation Between IShares Canadian and Buhler Industries

Can any of the company-specific risk be diversified away by investing in both IShares Canadian and Buhler Industries 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 Buhler Industries 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 Buhler Industries, you can compare the effects of market volatilities on IShares Canadian and Buhler Industries 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 Buhler Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and Buhler Industries.

Diversification Opportunities for IShares Canadian and Buhler Industries

0.75

Correlation Coefficient

IShares Canadian  Buhler Industries

Poor diversification

The 3 months correlation between IShares and Buhler is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and Buhler Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buhler Industries 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 Buhler Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buhler Industries has no effect on the direction of IShares Canadian i.e., IShares Canadian and Buhler Industries go up and down completely randomly.

Pair Corralation between IShares Canadian and Buhler Industries

Assuming the 90 days trading horizon IShares Canadian is expected to generate 11.3 times less return on investment than Buhler Industries. But when comparing it to its historical volatility, iShares Canadian HYBrid is 10.64 times less risky than Buhler Industries. It trades about 0.15 of its potential returns per unit of risk. Buhler Industries is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  240.00  in Buhler Industries on October 6, 2024 and sell it today you would earn a total of  70.00  from holding Buhler Industries or generate 29.17% return on investment over 90 days.

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

iShares Canadian HYBrid  vs.  Buhler Industries

iShares Canadian HYBrid

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian HYBrid are ranked lower than 11 (%) 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.

Buhler Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Buhler Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Buhler Industries displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Canadian and Buhler Industries

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

The idea behind iShares Canadian HYBrid and Buhler Industries 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.