Correlation Between IShares Canadian and IShares Conservative

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

Diversification Opportunities for IShares Canadian and IShares Conservative

ISharesISharesDiversified AwayISharesISharesDiversified Away100%
0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between IShares and IShares is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and iShares Conservative Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Conservative 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 IShares Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Conservative has no effect on the direction of IShares Canadian i.e., IShares Canadian and IShares Conservative go up and down completely randomly.

Pair Corralation between IShares Canadian and IShares Conservative

Assuming the 90 days trading horizon iShares Canadian HYBrid is expected to generate 1.32 times more return on investment than IShares Conservative. However, IShares Canadian is 1.32 times more volatile than iShares Conservative Short. It trades about 0.18 of its potential returns per unit of risk. iShares Conservative Short is currently generating about 0.09 per unit of risk. If you would invest  1,922  in iShares Canadian HYBrid on November 22, 2024 and sell it today you would earn a total of  65.00  from holding iShares Canadian HYBrid or generate 3.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

iShares Canadian HYBrid  vs.  iShares Conservative Short

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 0123
JavaScript chart by amCharts 3.21.15XHB XSC
       Timeline  
iShares Canadian HYBrid 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb19.219.319.419.519.619.719.819.920
iShares Conservative 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in iShares Conservative Short are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, IShares Conservative is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb17.717.7517.817.8517.917.9518

IShares Canadian and IShares Conservative Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-0.88-0.61-0.34-0.08880.01240.130.40.670.941.21 2468
JavaScript chart by amCharts 3.21.15XHB XSC
       Returns  

Pair Trading with IShares Canadian and IShares Conservative

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

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