Correlation Between Brompton North and IShares SPTSX

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Can any of the company-specific risk be diversified away by investing in both Brompton North and IShares SPTSX 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 Brompton North and IShares SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brompton North American and iShares SPTSX Capped, you can compare the effects of market volatilities on Brompton North and IShares SPTSX 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 Brompton North with a short position of IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton North and IShares SPTSX.

Diversification Opportunities for Brompton North and IShares SPTSX

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Brompton and IShares is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Brompton North American and iShares SPTSX Capped in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX Capped and Brompton 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 Brompton North American are associated (or correlated) with IShares SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SPTSX Capped has no effect on the direction of Brompton North i.e., Brompton North and IShares SPTSX go up and down completely randomly.

Pair Corralation between Brompton North and IShares SPTSX

Assuming the 90 days trading horizon Brompton North American is expected to under-perform the IShares SPTSX. But the etf apears to be less risky and, when comparing its historical volatility, Brompton North American is 1.66 times less risky than IShares SPTSX. The etf trades about -0.02 of its potential returns per unit of risk. The iShares SPTSX Capped is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,752  in iShares SPTSX Capped on September 13, 2024 and sell it today you would earn a total of  7.00  from holding iShares SPTSX Capped or generate 0.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Brompton North American  vs.  iShares SPTSX Capped

 Performance 
       Timeline  
Brompton North American 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Brompton North American are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brompton North displayed solid returns over the last few months and may actually be approaching a breakup point.
iShares SPTSX Capped 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Capped are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, IShares SPTSX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Brompton North and IShares SPTSX Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Brompton North and IShares SPTSX

The main advantage of trading using opposite Brompton North and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brompton North position performs unexpectedly, IShares SPTSX 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 IShares SPTSX will offset losses from the drop in IShares SPTSX's long position.
The idea behind Brompton North American and iShares SPTSX Capped 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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