Correlation Between Energy Leaders and IShares SPTSX
Can any of the company-specific risk be diversified away by investing in both Energy Leaders 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 Energy Leaders and IShares SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Leaders Plus and iShares SPTSX Capped, you can compare the effects of market volatilities on Energy Leaders 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 Energy Leaders with a short position of IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Leaders and IShares SPTSX.
Diversification Opportunities for Energy Leaders and IShares SPTSX
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Energy and IShares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Energy Leaders Plus 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 Energy Leaders 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 Energy Leaders Plus 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 Energy Leaders i.e., Energy Leaders and IShares SPTSX go up and down completely randomly.
Pair Corralation between Energy Leaders and IShares SPTSX
Assuming the 90 days trading horizon Energy Leaders is expected to generate 3.21 times less return on investment than IShares SPTSX. But when comparing it to its historical volatility, Energy Leaders Plus is 1.43 times less risky than IShares SPTSX. It trades about 0.03 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 1,505 in iShares SPTSX Capped on August 29, 2024 and sell it today you would earn a total of 281.00 from holding iShares SPTSX Capped or generate 18.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Leaders Plus vs. iShares SPTSX Capped
Performance |
| Timeline |
| Energy Leaders Plus |
| iShares SPTSX Capped |
Energy Leaders and IShares SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Leaders and IShares SPTSX
The main advantage of trading using opposite Energy Leaders and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Leaders 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.| Energy Leaders vs. iShares SPTSX Capped | Energy Leaders vs. BMO Equal Weight | Energy Leaders vs. BMO SPTSX Equal | Energy Leaders vs. BMO Equal Weight |
| 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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