Correlation Between IShares IG and Mackenzie Emerging

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

By analyzing existing cross correlation between iShares IG Corporate and Mackenzie Emerging Markets, you can compare the effects of market volatilities on IShares IG and Mackenzie Emerging 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 IG with a short position of Mackenzie Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IG and Mackenzie Emerging.

Diversification Opportunities for IShares IG and Mackenzie Emerging

0.83

Correlation Coefficient

IShares IG  Mackenzie Emerging

Very poor diversification

The 3 months correlation between IShares and Mackenzie is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding iShares IG Corporate and Mackenzie Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie Emerging and IShares IG 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 IG Corporate are associated (or correlated) with Mackenzie Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie Emerging has no effect on the direction of IShares IG i.e., IShares IG and Mackenzie Emerging go up and down completely randomly.

Pair Corralation between IShares IG and Mackenzie Emerging

Assuming the 90 days trading horizon IShares IG is expected to generate 3.56 times less return on investment than Mackenzie Emerging. In addition to that, IShares IG is 1.01 times more volatile than Mackenzie Emerging Markets. It trades about 0.01 of its total potential returns per unit of risk. Mackenzie Emerging Markets is currently generating about 0.04 per unit of volatility. If you would invest  7,011  in Mackenzie Emerging Markets on October 7, 2024 and sell it today you would earn a total of  789.00  from holding Mackenzie Emerging Markets or generate 11.25% return on investment over 90 days.

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

iShares IG Corporate  vs.  Mackenzie Emerging Markets

iShares IG Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mackenzie Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mackenzie Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Mackenzie Emerging 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 IG and Mackenzie Emerging

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

The idea behind iShares IG Corporate and Mackenzie Emerging Markets 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.