Correlation Between Dynamic Active and IShares SPTSX
Can any of the company-specific risk be diversified away by investing in both Dynamic Active 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 Dynamic Active and IShares SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dynamic Active Mid Cap and iShares SPTSX Small, you can compare the effects of market volatilities on Dynamic Active 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 Dynamic Active with a short position of IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynamic Active and IShares SPTSX.
Diversification Opportunities for Dynamic Active and IShares SPTSX
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dynamic and IShares is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Active Mid Cap and iShares SPTSX Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX Small and Dynamic Active 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 Dynamic Active Mid Cap 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 Small has no effect on the direction of Dynamic Active i.e., Dynamic Active and IShares SPTSX go up and down completely randomly.
Pair Corralation between Dynamic Active and IShares SPTSX
Assuming the 90 days trading horizon Dynamic Active Mid Cap is expected to generate 1.5 times more return on investment than IShares SPTSX. However, Dynamic Active is 1.5 times more volatile than iShares SPTSX Small. It trades about 0.25 of its potential returns per unit of risk. iShares SPTSX Small is currently generating about 0.03 per unit of risk. If you would invest 1,368 in Dynamic Active Mid Cap on August 30, 2024 and sell it today you would earn a total of 92.00 from holding Dynamic Active Mid Cap or generate 6.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Dynamic Active Mid Cap vs. iShares SPTSX Small
Performance |
| Timeline |
| Dynamic Active Mid |
| iShares SPTSX Small |
Dynamic Active and IShares SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dynamic Active and IShares SPTSX
The main advantage of trading using opposite Dynamic Active and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynamic Active 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.| Dynamic Active vs. Dynamic Active Dividend | Dynamic Active vs. Dynamic Active Global | Dynamic Active vs. Dynamic Active Canadian | Dynamic Active vs. Dynamic Active Global |
| IShares SPTSX vs. iShares Convertible Bond | IShares SPTSX vs. iShares SP Mid Cap | IShares SPTSX vs. iShares Edge MSCI | IShares SPTSX vs. iShares Flexible Monthly |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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