Correlation Between Extendicare and IShares SPTSX
Can any of the company-specific risk be diversified away by investing in both Extendicare 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 Extendicare and IShares SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extendicare and iShares SPTSX Capped, you can compare the effects of market volatilities on Extendicare 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 Extendicare with a short position of IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extendicare and IShares SPTSX.
Diversification Opportunities for Extendicare and IShares SPTSX
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Extendicare and IShares is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Extendicare 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 Extendicare 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 Extendicare 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 Extendicare i.e., Extendicare and IShares SPTSX go up and down completely randomly.
Pair Corralation between Extendicare and IShares SPTSX
Assuming the 90 days trading horizon Extendicare is expected to generate 1.6 times more return on investment than IShares SPTSX. However, Extendicare is 1.6 times more volatile than iShares SPTSX Capped. It trades about 0.36 of its potential returns per unit of risk. iShares SPTSX Capped is currently generating about 0.13 per unit of risk. If you would invest 917.00 in Extendicare on September 1, 2024 and sell it today you would earn a total of 145.00 from holding Extendicare or generate 15.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extendicare vs. iShares SPTSX Capped
Performance |
| Timeline |
| Extendicare |
| iShares SPTSX Capped |
Extendicare and IShares SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extendicare and IShares SPTSX
The main advantage of trading using opposite Extendicare and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extendicare 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.| Extendicare vs. Sienna Senior Living | Extendicare vs. Chartwell Retirement Residences | Extendicare vs. Chemtrade Logistics Income | Extendicare vs. NorthWest Healthcare Properties |
| IShares SPTSX vs. iShares SPTSX Capped | IShares SPTSX vs. iShares SPTSX Global | IShares SPTSX vs. iShares SPTSX 60 | 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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