Correlation Between SPTSX Dividend and Bip Investment

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

Diversification Opportunities for SPTSX Dividend and Bip Investment

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between SPTSX and Bip is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding SPTSX Dividend Aristocrats and Bip Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bip Investment Corp and SPTSX Dividend 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 SPTSX Dividend Aristocrats are associated (or correlated) with Bip Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bip Investment Corp has no effect on the direction of SPTSX Dividend i.e., SPTSX Dividend and Bip Investment go up and down completely randomly.
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Pair Corralation between SPTSX Dividend and Bip Investment

Assuming the 90 days trading horizon SPTSX Dividend Aristocrats is expected to generate 1.64 times more return on investment than Bip Investment. However, SPTSX Dividend is 1.64 times more volatile than Bip Investment Corp. It trades about 0.17 of its potential returns per unit of risk. Bip Investment Corp is currently generating about 0.22 per unit of risk. If you would invest  36,732  in SPTSX Dividend Aristocrats on August 27, 2024 and sell it today you would earn a total of  628.00  from holding SPTSX Dividend Aristocrats or generate 1.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

SPTSX Dividend Aristocrats  vs.  Bip Investment Corp

 Performance 
       Timeline  

SPTSX Dividend and Bip Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SPTSX Dividend and Bip Investment

The main advantage of trading using opposite SPTSX Dividend and Bip Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPTSX Dividend position performs unexpectedly, Bip Investment 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 Bip Investment will offset losses from the drop in Bip Investment's long position.
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The idea behind SPTSX Dividend Aristocrats and Bip Investment Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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