Correlation Between CI Canada and MegaShort

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

By analyzing existing cross correlation between CI Canada Quality and MegaShort SP 500, you can compare the effects of market volatilities on CI Canada and MegaShort 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 CI Canada with a short position of MegaShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of CI Canada and MegaShort.

Diversification Opportunities for CI Canada and MegaShort

0.37

Correlation Coefficient

CI Canada  MegaShort

Weak diversification

The 3 months correlation between DGRC and MegaShort is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding CI Canada Quality and MegaShort SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MegaShort SP 500 and CI Canada 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 CI Canada Quality are associated (or correlated) with MegaShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MegaShort SP 500 has no effect on the direction of CI Canada i.e., CI Canada and MegaShort go up and down completely randomly.

Pair Corralation between CI Canada and MegaShort

Assuming the 90 days trading horizon CI Canada Quality is expected to generate 0.25 times more return on investment than MegaShort. However, CI Canada Quality is 4.07 times less risky than MegaShort. It trades about 0.36 of its potential returns per unit of risk. MegaShort SP 500 is currently generating about -0.28 per unit of risk. If you would invest  3,831  in CI Canada Quality on April 20, 2025 and sell it today you would earn a total of  446.00  from holding CI Canada Quality or generate 11.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	62.5%
Values	Daily Returns

CI Canada Quality  vs.  MegaShort SP 500

CI Canada Quality

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CI Canada Quality are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CI Canada may actually be approaching a critical reversion point that can send shares even higher in August 2025.

MegaShort SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days MegaShort SP 500 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 August 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with CI Canada and MegaShort

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

The idea behind CI Canada Quality and MegaShort SP 500 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..