Correlation Between IShares Small and Desjardins

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

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

Diversification Opportunities for IShares Small and Desjardins

-0.14

Correlation Coefficient

IShares Small  Desjardins

Good diversification

The 3 months correlation between IShares and Desjardins is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding iShares Small Cap and Desjardins RI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins RI Emerging and IShares Small 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 Small Cap are associated (or correlated) with Desjardins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins RI Emerging has no effect on the direction of IShares Small i.e., IShares Small and Desjardins go up and down completely randomly.

Pair Corralation between IShares Small and Desjardins

Assuming the 90 days trading horizon iShares Small Cap is expected to under-perform the Desjardins. In addition to that, IShares Small is 1.32 times more volatile than Desjardins RI Emerging. It trades about -0.21 of its total potential returns per unit of risk. Desjardins RI Emerging is currently generating about 0.03 per unit of volatility. If you would invest  2,346  in Desjardins RI Emerging on December 4, 2024 and sell it today you would earn a total of  30.00  from holding Desjardins RI Emerging or generate 1.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

iShares Small Cap  vs.  Desjardins RI Emerging

iShares Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Desjardins RI Emerging

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins RI Emerging are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Desjardins 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 Small and Desjardins

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

The idea behind iShares Small Cap and Desjardins RI Emerging 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.