Correlation Between IShares Canadian and Choice Properties

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

Diversification Opportunities for IShares Canadian and Choice Properties

-0.63

Correlation Coefficient

IShares Canadian  Choice Properties

Excellent diversification

The 3 months correlation between IShares and Choice is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and Choice Properties Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Properties Real 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 Choice Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Properties Real has no effect on the direction of IShares Canadian i.e., IShares Canadian and Choice Properties go up and down completely randomly.

Pair Corralation between IShares Canadian and Choice Properties

Assuming the 90 days trading horizon iShares Canadian HYBrid is expected to generate 0.25 times more return on investment than Choice Properties. However, iShares Canadian HYBrid is 3.99 times less risky than Choice Properties. It trades about -0.11 of its potential returns per unit of risk. Choice Properties Real is currently generating about -0.16 per unit of risk. If you would invest  1,993  in iShares Canadian HYBrid on October 1, 2024 and sell it today you would lose (10.00) from holding iShares Canadian HYBrid or give up 0.5% of portfolio value over 90 days.

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

iShares Canadian HYBrid  vs.  Choice Properties Real

iShares Canadian HYBrid

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian HYBrid are ranked lower than 4 (%) 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.

Choice Properties Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Choice Properties Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with IShares Canadian and Choice Properties

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

The idea behind iShares Canadian HYBrid and Choice Properties Real 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.