Correlation Between IShares Canadian and Commander Resources

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

Diversification Opportunities for IShares Canadian and Commander Resources

0.41

Correlation Coefficient

IShares Canadian  Commander Resources

Very weak diversification

The 3 months correlation between IShares and Commander is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and Commander Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commander Resources 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 Commander Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commander Resources has no effect on the direction of IShares Canadian i.e., IShares Canadian and Commander Resources go up and down completely randomly.

Pair Corralation between IShares Canadian and Commander Resources

Assuming the 90 days trading horizon iShares Canadian HYBrid is expected to generate 0.04 times more return on investment than Commander Resources. However, iShares Canadian HYBrid is 24.45 times less risky than Commander Resources. It trades about -0.09 of its potential returns per unit of risk. Commander Resources is currently generating about -0.18 per unit of risk. If you would invest  1,990  in iShares Canadian HYBrid on October 9, 2024 and sell it today you would lose (7.00) from holding iShares Canadian HYBrid or give up 0.35% of portfolio value over 90 days.

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

iShares Canadian HYBrid  vs.  Commander Resources

iShares Canadian HYBrid

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian HYBrid are ranked lower than 10 (%) 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.

Commander Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Commander Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Commander Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Canadian and Commander Resources

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

The idea behind iShares Canadian HYBrid and Commander Resources 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.