Correlation Between IShares Canadian and Vanguard Total

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

By analyzing existing cross correlation between iShares Canadian Short and Vanguard Total Market, you can compare the effects of market volatilities on IShares Canadian and Vanguard Total 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 Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and Vanguard Total.

Diversification Opportunities for IShares Canadian and Vanguard Total

0.3

Correlation Coefficient

IShares Canadian  Vanguard Total

Weak diversification

The 3 months correlation between IShares and Vanguard is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Short and Vanguard Total Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Market 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 Short are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Market has no effect on the direction of IShares Canadian i.e., IShares Canadian and Vanguard Total go up and down completely randomly.

Pair Corralation between IShares Canadian and Vanguard Total

Assuming the 90 days trading horizon IShares Canadian is expected to generate 7.17 times less return on investment than Vanguard Total. But when comparing it to its historical volatility, iShares Canadian Short is 4.81 times less risky than Vanguard Total. It trades about 0.15 of its potential returns per unit of risk. Vanguard Total Market is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  9,644  in Vanguard Total Market on September 2, 2024 and sell it today you would earn a total of  996.00  from holding Vanguard Total Market or generate 10.33% return on investment over 90 days.

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

iShares Canadian Short  vs.  Vanguard Total Market

iShares Canadian Short

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian Short are ranked lower than 11 (%) 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.

Vanguard Total Market

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Market are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Canadian and Vanguard Total

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

The idea behind iShares Canadian Short and Vanguard Total Market 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..