Correlation Between IShares High and Guardian Canadian

Can any of the company-specific risk be diversified away by investing in both IShares High and Guardian Canadian 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 High and Guardian Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares High Dividend and Guardian Canadian Sector, you can compare the effects of market volatilities on IShares High and Guardian Canadian 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 High with a short position of Guardian Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares High and Guardian Canadian.

Diversification Opportunities for IShares High and Guardian Canadian

0.5

Correlation Coefficient

IShares High  Guardian Canadian

Very weak diversification

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

Pair Corralation between IShares High and Guardian Canadian

Assuming the 90 days trading horizon iShares High Dividend is expected to generate 1.9 times more return on investment than Guardian Canadian. However, IShares High is 1.9 times more volatile than Guardian Canadian Sector. It trades about 0.26 of its potential returns per unit of risk. Guardian Canadian Sector is currently generating about -0.14 per unit of risk. If you would invest  3,410  in iShares High Dividend on December 4, 2024 and sell it today you would earn a total of  136.00  from holding iShares High Dividend or generate 3.99% return on investment over 90 days.

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

iShares High Dividend  vs.  Guardian Canadian Sector

iShares High Dividend

Risk-Adjusted Performance

Weak

Over the last 90 days iShares High Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares High is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Guardian Canadian Sector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guardian Canadian Sector has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Guardian Canadian 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 High and Guardian Canadian

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

The idea behind iShares High Dividend and Guardian Canadian Sector 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.