Correlation Between IShares Canadian and First National

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

Diversification Opportunities for IShares Canadian and First National

0.5

Correlation Coefficient

IShares Canadian  First National

Very weak diversification

The 3 months correlation between IShares and First is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and First National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Financial 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Financial has no effect on the direction of IShares Canadian i.e., IShares Canadian and First National go up and down completely randomly.

Pair Corralation between IShares Canadian and First National

Assuming the 90 days trading horizon iShares Canadian HYBrid is expected to generate 0.26 times more return on investment than First National. However, iShares Canadian HYBrid is 3.84 times less risky than First National. It trades about 0.19 of its potential returns per unit of risk. First National Financial is currently generating about 0.04 per unit of risk. If you would invest  1,927  in iShares Canadian HYBrid on August 31, 2024 and sell it today you would earn a total of  64.00  from holding iShares Canadian HYBrid or generate 3.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

iShares Canadian HYBrid  vs.  First National Financial

iShares Canadian HYBrid

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian HYBrid are ranked lower than 14 (%) 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.

First National Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First National Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, First National is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Canadian and First National

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

The idea behind iShares Canadian HYBrid and First National Financial 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.