Correlation Between IShares Canadian and ESE Entertainment

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

Diversification Opportunities for IShares Canadian and ESE Entertainment

0.31

Correlation Coefficient

IShares Canadian  ESE Entertainment

Weak diversification

The 3 months correlation between IShares and ESE is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and ESE Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESE Entertainment 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 ESE Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESE Entertainment has no effect on the direction of IShares Canadian i.e., IShares Canadian and ESE Entertainment go up and down completely randomly.

Pair Corralation between IShares Canadian and ESE Entertainment

Assuming the 90 days trading horizon IShares Canadian is expected to generate 4.64 times less return on investment than ESE Entertainment. But when comparing it to its historical volatility, iShares Canadian HYBrid is 25.71 times less risky than ESE Entertainment. It trades about 0.09 of its potential returns per unit of risk. ESE Entertainment is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6.00  in ESE Entertainment on December 29, 2024 and sell it today you would lose (0.50) from holding ESE Entertainment or give up 8.33% of portfolio value over 90 days.

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

iShares Canadian HYBrid  vs.  ESE Entertainment

iShares Canadian HYBrid

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian HYBrid are ranked lower than 6 (%) 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.

ESE Entertainment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ESE Entertainment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ESE Entertainment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares Canadian and ESE Entertainment

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

The idea behind iShares Canadian HYBrid and ESE Entertainment 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.