Correlation Between IShares Convertible and IShares SPTSX
Can any of the company-specific risk be diversified away by investing in both IShares Convertible 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 IShares Convertible and IShares SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Convertible Bond and iShares SPTSX Capped, you can compare the effects of market volatilities on IShares Convertible 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 IShares Convertible with a short position of IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Convertible and IShares SPTSX.
Diversification Opportunities for IShares Convertible and IShares SPTSX
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between IShares and IShares is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding iShares Convertible Bond 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 IShares Convertible 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 Convertible Bond 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 IShares Convertible i.e., IShares Convertible and IShares SPTSX go up and down completely randomly.
Pair Corralation between IShares Convertible and IShares SPTSX
Assuming the 90 days trading horizon IShares Convertible is expected to generate 1.45 times less return on investment than IShares SPTSX. But when comparing it to its historical volatility, iShares Convertible Bond is 1.05 times less risky than IShares SPTSX. It trades about 0.05 of its potential returns per unit of risk. iShares SPTSX Capped is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,210 in iShares SPTSX Capped on August 26, 2024 and sell it today you would earn a total of 1,120 from holding iShares SPTSX Capped or generate 26.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Convertible Bond vs. iShares SPTSX Capped
Performance |
| Timeline |
| iShares Convertible Bond |
| iShares SPTSX Capped |
IShares Convertible and IShares SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Convertible and IShares SPTSX
The main advantage of trading using opposite IShares Convertible and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Convertible 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.| IShares Convertible vs. BMO Mid Federal | IShares Convertible vs. BMO Short Corporate | IShares Convertible vs. BMO Emerging Markets | IShares Convertible vs. BMO Long Corporate |
| IShares SPTSX vs. iShares SPTSX Capped | IShares SPTSX vs. iShares Global Healthcare | IShares SPTSX vs. iShares Global Real | IShares SPTSX vs. iShares SPTSX Capped |
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 CEOs Directory module to screen CEOs from public companies around the world.
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