Correlation Between Financial and IShares SPTSX
Can any of the company-specific risk be diversified away by investing in both Financial 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 Financial and IShares SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial 15 Split and iShares SPTSX Capped, you can compare the effects of market volatilities on Financial 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 Financial with a short position of IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and IShares SPTSX.
Diversification Opportunities for Financial and IShares SPTSX
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Financial and IShares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split 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 Financial 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 Financial 15 Split 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 Financial i.e., Financial and IShares SPTSX go up and down completely randomly.
Pair Corralation between Financial and IShares SPTSX
Assuming the 90 days trading horizon Financial 15 Split is expected to generate 2.25 times more return on investment than IShares SPTSX. However, Financial is 2.25 times more volatile than iShares SPTSX Capped. It trades about 0.49 of its potential returns per unit of risk. iShares SPTSX Capped is currently generating about 0.33 per unit of risk. If you would invest 884.00 in Financial 15 Split on August 28, 2024 and sell it today you would earn a total of 139.00 from holding Financial 15 Split or generate 15.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial 15 Split vs. iShares SPTSX Capped
Performance |
| Timeline |
| Financial 15 Split |
| iShares SPTSX Capped |
Financial and IShares SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial and IShares SPTSX
The main advantage of trading using opposite Financial and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial 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.| Financial vs. Dividend 15 Split | Financial vs. Dividend Growth Split | Financial vs. North American Financial | Financial vs. Life Banc Split |
| IShares SPTSX vs. Brompton Global Dividend | IShares SPTSX vs. Tech Leaders Income | IShares SPTSX vs. Global Healthcare Income | IShares SPTSX vs. Brompton European Dividend |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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