Correlation Between IShares Canadian and Vanguard Global

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

Diversification Opportunities for IShares Canadian and Vanguard Global

0.73

Correlation Coefficient

IShares Canadian  Vanguard Global

Poor diversification

The 3 months correlation between IShares and Vanguard is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and Vanguard Global Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Global Value 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 Vanguard Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Global Value has no effect on the direction of IShares Canadian i.e., IShares Canadian and Vanguard Global go up and down completely randomly.

Pair Corralation between IShares Canadian and Vanguard Global

Assuming the 90 days trading horizon IShares Canadian is expected to generate 1.35 times less return on investment than Vanguard Global. But when comparing it to its historical volatility, iShares Canadian HYBrid is 1.2 times less risky than Vanguard Global. It trades about 0.07 of its potential returns per unit of risk. Vanguard Global Value is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,884  in Vanguard Global Value on September 22, 2024 and sell it today you would earn a total of  1,373  from holding Vanguard Global Value or generate 35.35% return on investment over 90 days.

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

iShares Canadian HYBrid  vs.  Vanguard Global Value

iShares Canadian HYBrid

Risk-Adjusted Performance

6 of 100

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.

Vanguard Global Value

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Global Value are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Vanguard Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Canadian and Vanguard Global

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

The idea behind iShares Canadian HYBrid and Vanguard Global Value 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.