Correlation Between IShares SPTSX and IShares Small
Can any of the company-specific risk be diversified away by investing in both IShares SPTSX and IShares Small 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 SPTSX and IShares Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SPTSX Small and iShares Small Cap, you can compare the effects of market volatilities on IShares SPTSX and IShares Small 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 SPTSX with a short position of IShares Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and IShares Small.
Diversification Opportunities for IShares SPTSX and IShares Small
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 SPTSX Small and iShares Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Small Cap and IShares SPTSX 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 SPTSX Small are associated (or correlated) with IShares Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Small Cap has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and IShares Small go up and down completely randomly.
Pair Corralation between IShares SPTSX and IShares Small
Assuming the 90 days trading horizon IShares SPTSX is expected to generate 19.59 times less return on investment than IShares Small. But when comparing it to its historical volatility, iShares SPTSX Small is 2.12 times less risky than IShares Small. It trades about 0.03 of its potential returns per unit of risk. iShares Small Cap is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 4,303 in iShares Small Cap on August 30, 2024 and sell it today you would earn a total of 371.00 from holding iShares Small Cap or generate 8.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SPTSX Small vs. iShares Small Cap
Performance |
| Timeline |
| iShares SPTSX Small |
| iShares Small Cap |
IShares SPTSX and IShares Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SPTSX and IShares Small
The main advantage of trading using opposite IShares SPTSX and IShares Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SPTSX position performs unexpectedly, IShares Small 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 Small will offset losses from the drop in IShares Small's long position.| IShares SPTSX vs. iShares SPTSX Completion | IShares SPTSX vs. Manulife Multifactor Canadian | IShares SPTSX vs. BMO Aggregate Bond | IShares SPTSX vs. iShares Canadian HYBrid |
| IShares Small vs. iShares SPTSX Small | IShares Small vs. iShares MSCI Europe | IShares Small vs. BMO Aggregate Bond | IShares Small vs. iShares Canadian HYBrid |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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