Correlation Between IShares Canadian and IShares SPTSX
Can any of the company-specific risk be diversified away by investing in both IShares Canadian 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 Canadian 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 Canadian Select and iShares SPTSX Composite, you can compare the effects of market volatilities on IShares Canadian 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 Canadian with a short position of IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and IShares SPTSX.
Diversification Opportunities for IShares Canadian and IShares SPTSX
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Select and iShares SPTSX Composite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX Composite and IShares Canadian 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 Canadian Select 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 Composite has no effect on the direction of IShares Canadian i.e., IShares Canadian and IShares SPTSX go up and down completely randomly.
Pair Corralation between IShares Canadian and IShares SPTSX
Assuming the 90 days trading horizon iShares Canadian Select is expected to generate 1.02 times more return on investment than IShares SPTSX. However, IShares Canadian is 1.02 times more volatile than iShares SPTSX Composite. It trades about 0.28 of its potential returns per unit of risk. iShares SPTSX Composite is currently generating about 0.21 per unit of risk. If you would invest 3,147 in iShares Canadian Select on August 25, 2024 and sell it today you would earn a total of 85.00 from holding iShares Canadian Select or generate 2.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Canadian Select vs. iShares SPTSX Composite
Performance |
| Timeline |
| iShares Canadian Select |
| iShares SPTSX Composite |
IShares Canadian and IShares SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Canadian and IShares SPTSX
The main advantage of trading using opposite IShares Canadian and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Canadian 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 Canadian vs. iShares Diversified Monthly | IShares Canadian vs. iShares SPTSX Capped | IShares Canadian vs. iShares SPTSX Capped |
| IShares SPTSX vs. iShares Diversified Monthly | IShares SPTSX vs. iShares SPTSX Capped | 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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