Correlation Between Wealthsimple North and Wealthsimple Shariah

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

By analyzing existing cross correlation between Wealthsimple North American and Wealthsimple Shariah World, you can compare the effects of market volatilities on Wealthsimple North and Wealthsimple Shariah 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 Wealthsimple North with a short position of Wealthsimple Shariah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wealthsimple North and Wealthsimple Shariah.

Diversification Opportunities for Wealthsimple North and Wealthsimple Shariah

0.26

Correlation Coefficient

Wealthsimple North  Wealthsimple Shariah

Modest diversification

The 3 months correlation between Wealthsimple and Wealthsimple is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Wealthsimple North American and Wealthsimple Shariah World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wealthsimple Shariah and Wealthsimple North 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 Wealthsimple North American are associated (or correlated) with Wealthsimple Shariah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wealthsimple Shariah has no effect on the direction of Wealthsimple North i.e., Wealthsimple North and Wealthsimple Shariah go up and down completely randomly.

Pair Corralation between Wealthsimple North and Wealthsimple Shariah

Assuming the 90 days trading horizon Wealthsimple North is expected to generate 4.21 times less return on investment than Wealthsimple Shariah. But when comparing it to its historical volatility, Wealthsimple North American is 2.39 times less risky than Wealthsimple Shariah. It trades about 0.08 of its potential returns per unit of risk. Wealthsimple Shariah World is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,982  in Wealthsimple Shariah World on April 20, 2025 and sell it today you would earn a total of  190.00  from holding Wealthsimple Shariah World or generate 6.37% return on investment over 90 days.

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

Wealthsimple North American  vs.  Wealthsimple Shariah World

Wealthsimple North

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wealthsimple North American are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Wealthsimple North is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Wealthsimple Shariah

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wealthsimple Shariah World are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Wealthsimple Shariah may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Wealthsimple North and Wealthsimple Shariah

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

The idea behind Wealthsimple North American and Wealthsimple Shariah World 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.