Correlation Between Wealthsimple Shariah and First American

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

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

Diversification Opportunities for Wealthsimple Shariah and First American

-0.25

Correlation Coefficient

Wealthsimple Shariah  First American

Very good diversification

The 3 months correlation between Wealthsimple and First is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Wealthsimple Shariah World and First American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American and Wealthsimple Shariah 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 Shariah World are associated (or correlated) with First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American has no effect on the direction of Wealthsimple Shariah i.e., Wealthsimple Shariah and First American go up and down completely randomly.

Pair Corralation between Wealthsimple Shariah and First American

Assuming the 90 days trading horizon Wealthsimple Shariah is expected to generate 1.42 times less return on investment than First American. But when comparing it to its historical volatility, Wealthsimple Shariah World is 2.1 times less risky than First American. It trades about 0.06 of its potential returns per unit of risk. First American is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,387  in First American on August 30, 2025 and sell it today you would earn a total of  217.00  from holding First American or generate 3.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Wealthsimple Shariah World  vs.  First American

Wealthsimple Shariah

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Wealthsimple Shariah World are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Wealthsimple Shariah is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

First American

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First American are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, First American is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Wealthsimple Shariah and First American

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

The idea behind Wealthsimple Shariah World and First 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.