Correlation Between IShares Canadian and CI Canadian

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

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

Diversification Opportunities for IShares Canadian and CI Canadian

0.62

Correlation Coefficient

IShares Canadian  CI Canadian

Poor diversification

The 3 months correlation between IShares and CAGG is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Real and CI Canadian Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Canadian Aggregate 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 Real are associated (or correlated) with CI Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Canadian Aggregate has no effect on the direction of IShares Canadian i.e., IShares Canadian and CI Canadian go up and down completely randomly.

Pair Corralation between IShares Canadian and CI Canadian

Assuming the 90 days trading horizon iShares Canadian Real is expected to generate 1.64 times more return on investment than CI Canadian. However, IShares Canadian is 1.64 times more volatile than CI Canadian Aggregate. It trades about 0.12 of its potential returns per unit of risk. CI Canadian Aggregate is currently generating about 0.14 per unit of risk. If you would invest  2,298  in iShares Canadian Real on December 2, 2024 and sell it today you would earn a total of  68.00  from holding iShares Canadian Real or generate 2.96% return on investment over 90 days.

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

iShares Canadian Real  vs.  CI Canadian Aggregate

iShares Canadian Real

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian Real are ranked lower than 5 (%) 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 current stock price disarray, may contribute to short-term losses for the investors.

CI Canadian Aggregate

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CI Canadian Aggregate are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CI 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 Canadian and CI Canadian

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

The idea behind iShares Canadian Real and CI Canadian Aggregate 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.