Correlation Between IShares Core and Wealthsimple North

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

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

Diversification Opportunities for IShares Core and Wealthsimple North

0.55

Correlation Coefficient

IShares Core  Wealthsimple North

Very weak diversification

The 3 months correlation between IShares and Wealthsimple is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Wealthsimple North American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wealthsimple North and IShares Core 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 Core SP are associated (or correlated) with Wealthsimple North. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wealthsimple North has no effect on the direction of IShares Core i.e., IShares Core and Wealthsimple North go up and down completely randomly.

Pair Corralation between IShares Core and Wealthsimple North

Assuming the 90 days trading horizon iShares Core SP is expected to generate 2.63 times more return on investment than Wealthsimple North. However, IShares Core is 2.63 times more volatile than Wealthsimple North American. It trades about 0.39 of its potential returns per unit of risk. Wealthsimple North American is currently generating about 0.08 per unit of risk. If you would invest  5,329  in iShares Core SP on April 21, 2025 and sell it today you would earn a total of  1,144  from holding iShares Core SP or generate 21.47% return on investment over 90 days.

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

iShares Core SP  vs.  Wealthsimple North American

iShares Core SP

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares Core displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with IShares Core and Wealthsimple North

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

The idea behind iShares Core SP and Wealthsimple North American 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.