Correlation Between IShares MSCI and CIBC Core

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

By analyzing existing cross correlation between iShares MSCI USA and CIBC Core Fixed, you can compare the effects of market volatilities on IShares MSCI and CIBC Core 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 MSCI with a short position of CIBC Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and CIBC Core.

Diversification Opportunities for IShares MSCI and CIBC Core

0.65

Correlation Coefficient

IShares MSCI  CIBC Core

Poor diversification

The 3 months correlation between IShares and CIBC is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and CIBC Core Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Core Fixed and IShares MSCI 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 MSCI USA are associated (or correlated) with CIBC Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Core Fixed has no effect on the direction of IShares MSCI i.e., IShares MSCI and CIBC Core go up and down completely randomly.

Pair Corralation between IShares MSCI and CIBC Core

Assuming the 90 days trading horizon iShares MSCI USA is expected to generate 5.69 times more return on investment than CIBC Core. However, IShares MSCI is 5.69 times more volatile than CIBC Core Fixed. It trades about 0.26 of its potential returns per unit of risk. CIBC Core Fixed is currently generating about 0.09 per unit of risk. If you would invest  3,565  in iShares MSCI USA on April 20, 2025 and sell it today you would earn a total of  564.00  from holding iShares MSCI USA or generate 15.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

iShares MSCI USA  vs.  CIBC Core Fixed

iShares MSCI USA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares MSCI displayed solid returns over the last few months and may actually be approaching a breakup point.

CIBC Core Fixed

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CIBC Core Fixed are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CIBC Core is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and CIBC Core

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

The idea behind iShares MSCI USA and CIBC Core Fixed 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.