Correlation Between IShares SP and IShares SPTSX
Can any of the company-specific risk be diversified away by investing in both IShares SP 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 IShares SP and IShares SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SP Global and iShares SPTSX Capped, you can compare the effects of market volatilities on IShares SP 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 IShares SP with a short position of IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and IShares SPTSX.
Diversification Opportunities for IShares SP and IShares SPTSX
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Global 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 IShares SP 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 iShares SP Global 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 IShares SP i.e., IShares SP and IShares SPTSX go up and down completely randomly.
Pair Corralation between IShares SP and IShares SPTSX
Assuming the 90 days trading horizon IShares SP is expected to generate 1.24 times less return on investment than IShares SPTSX. In addition to that, IShares SP is 1.41 times more volatile than iShares SPTSX Capped. It trades about 0.09 of its total potential returns per unit of risk. iShares SPTSX Capped is currently generating about 0.16 per unit of volatility. If you would invest 4,220 in iShares SPTSX Capped on September 12, 2024 and sell it today you would earn a total of 1,369 from holding iShares SPTSX Capped or generate 32.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SP Global vs. iShares SPTSX Capped
Performance |
| Timeline |
| iShares SP Global |
| iShares SPTSX Capped |
IShares SP and IShares SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and IShares SPTSX
The main advantage of trading using opposite IShares SP and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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.| IShares SP vs. iShares SP Global | IShares SP vs. iShares SPTSX Capped | IShares SP vs. iShares Global Healthcare | IShares SP vs. iShares Global Infrastructure |
| IShares SPTSX vs. First Trust AlphaDEX | IShares SPTSX vs. FT AlphaDEX Industrials | IShares SPTSX vs. BMO SPTSX Equal | IShares SPTSX vs. First Trust Senior |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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