Correlation Between IShares Small and CI MidCap

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

Diversification Opportunities for IShares Small and CI MidCap

0.83

Correlation Coefficient

IShares Small  CI MidCap

Very poor diversification

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

Pair Corralation between IShares Small and CI MidCap

Assuming the 90 days trading horizon iShares Small Cap is expected to under-perform the CI MidCap. In addition to that, IShares Small is 1.27 times more volatile than CI MidCap Dividend. It trades about -0.13 of its total potential returns per unit of risk. CI MidCap Dividend is currently generating about -0.03 per unit of volatility. If you would invest  3,354  in CI MidCap Dividend on December 29, 2024 and sell it today you would lose (74.00) from holding CI MidCap Dividend or give up 2.21% of portfolio value over 90 days.

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

iShares Small Cap  vs.  CI MidCap Dividend

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 latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

CI MidCap Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days CI MidCap Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, CI MidCap is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Small and CI MidCap

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

The idea behind iShares Small Cap and CI MidCap Dividend 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.