Correlation Between IShares Canadian and Transition Metals

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

Diversification Opportunities for IShares Canadian and Transition Metals

-0.79

Correlation Coefficient

IShares Canadian  Transition Metals

Pay attention - limited upside

The 3 months correlation between IShares and Transition is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and Transition Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transition Metals Corp 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 Transition Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transition Metals Corp has no effect on the direction of IShares Canadian i.e., IShares Canadian and Transition Metals go up and down completely randomly.

Pair Corralation between IShares Canadian and Transition Metals

Assuming the 90 days trading horizon IShares Canadian is expected to generate 4.64 times less return on investment than Transition Metals. But when comparing it to its historical volatility, iShares Canadian HYBrid is 20.46 times less risky than Transition Metals. It trades about 0.1 of its potential returns per unit of risk. Transition Metals Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Transition Metals Corp on October 10, 2024 and sell it today you would lose (4.50) from holding Transition Metals Corp or give up 45.0% of portfolio value over 90 days.

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

iShares Canadian HYBrid  vs.  Transition Metals Corp

iShares Canadian HYBrid

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian HYBrid are ranked lower than 8 (%) 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.

Transition Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transition Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Transition Metals is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Canadian and Transition Metals

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

The idea behind iShares Canadian HYBrid and Transition Metals Corp 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.