Correlation Between IShares Canadian and Global Healthcare

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

Diversification Opportunities for IShares Canadian and Global Healthcare

0.82

Correlation Coefficient

IShares Canadian  Global Healthcare

Very poor diversification

The 3 months correlation between IShares and Global is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and Global Healthcare Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Healthcare Income 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 Global Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Healthcare Income has no effect on the direction of IShares Canadian i.e., IShares Canadian and Global Healthcare go up and down completely randomly.

Pair Corralation between IShares Canadian and Global Healthcare

Assuming the 90 days trading horizon IShares Canadian is expected to generate 5.63 times less return on investment than Global Healthcare. But when comparing it to its historical volatility, iShares Canadian HYBrid is 2.54 times less risky than Global Healthcare. It trades about 0.08 of its potential returns per unit of risk. Global Healthcare Income is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  747.00  in Global Healthcare Income on December 30, 2024 and sell it today you would earn a total of  61.00  from holding Global Healthcare Income or generate 8.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.31%
Values	Daily Returns

iShares Canadian HYBrid  vs.  Global Healthcare Income

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.

Global Healthcare Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Healthcare Income are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Global Healthcare may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares Canadian and Global Healthcare

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

The idea behind iShares Canadian HYBrid and Global Healthcare Income 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 Anywhere module to track or share privately all of your investments from the convenience of any device.