Correlation Between IShares Canadian and Global X

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

Diversification Opportunities for IShares Canadian and Global X

-0.37

Correlation Coefficient

IShares Canadian  Global X

Very good diversification

The 3 months correlation between IShares and Global is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Real and Global X SPTSX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X SPTSX 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X SPTSX has no effect on the direction of IShares Canadian i.e., IShares Canadian and Global X go up and down completely randomly.

Pair Corralation between IShares Canadian and Global X

Assuming the 90 days trading horizon IShares Canadian is expected to generate 11.09 times less return on investment than Global X. But when comparing it to its historical volatility, iShares Canadian Real is 1.07 times less risky than Global X. It trades about 0.02 of its potential returns per unit of risk. Global X SPTSX is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4,442  in Global X SPTSX on August 31, 2024 and sell it today you would earn a total of  288.00  from holding Global X SPTSX or generate 6.48% return on investment over 90 days.

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

iShares Canadian Real  vs.  Global X SPTSX

iShares Canadian Real

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian Real are ranked lower than 1 (%) 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.

Global X SPTSX

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X SPTSX are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with IShares Canadian and Global X

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

The idea behind iShares Canadian Real and Global X SPTSX 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.