Correlation Between IShares Core and Guardian Canadian

Can any of the company-specific risk be diversified away by investing in both IShares Core 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 Core 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 Core SPTSX and Guardian Canadian Sector, you can compare the effects of market volatilities on IShares Core 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 Core with a short position of Guardian Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Guardian Canadian.

Diversification Opportunities for IShares Core and Guardian Canadian

0.95

Correlation Coefficient

IShares Core  Guardian Canadian

Almost no diversification

The 3 months correlation between IShares and Guardian is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SPTSX 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 Core 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 Core SPTSX 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 Core i.e., IShares Core and Guardian Canadian go up and down completely randomly.

Pair Corralation between IShares Core and Guardian Canadian

Assuming the 90 days trading horizon IShares Core is expected to generate 1.02 times less return on investment than Guardian Canadian. But when comparing it to its historical volatility, iShares Core SPTSX is 1.08 times less risky than Guardian Canadian. It trades about 0.26 of its potential returns per unit of risk. Guardian Canadian Sector is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,538  in Guardian Canadian Sector on September 14, 2024 and sell it today you would earn a total of  199.00  from holding Guardian Canadian Sector or generate 7.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

iShares Core SPTSX  vs.  Guardian Canadian Sector

iShares Core SPTSX

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SPTSX are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Guardian Canadian Sector

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Canadian Sector are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Guardian Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Core and Guardian Canadian

The main advantage of trading using opposite IShares Core and Guardian Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core SPTSX 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.