Correlation Between IShares Floating and IShares SPTSX
Can any of the company-specific risk be diversified away by investing in both IShares Floating 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 Floating 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 Floating Rate and iShares SPTSX North, you can compare the effects of market volatilities on IShares Floating 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 Floating with a short position of IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Floating and IShares SPTSX.
Diversification Opportunities for IShares Floating and IShares SPTSX
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between IShares and IShares is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding iShares Floating Rate and iShares SPTSX North in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX North and IShares Floating 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 Floating Rate 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 North has no effect on the direction of IShares Floating i.e., IShares Floating and IShares SPTSX go up and down completely randomly.
Pair Corralation between IShares Floating and IShares SPTSX
Assuming the 90 days trading horizon IShares Floating is expected to generate 2.03 times less return on investment than IShares SPTSX. But when comparing it to its historical volatility, iShares Floating Rate is 9.89 times less risky than IShares SPTSX. It trades about 0.34 of its potential returns per unit of risk. iShares SPTSX North is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,270 in iShares SPTSX North on September 5, 2024 and sell it today you would earn a total of 262.00 from holding iShares SPTSX North or generate 20.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Floating Rate vs. iShares SPTSX North
Performance |
| Timeline |
| iShares Floating Rate |
| iShares SPTSX North |
IShares Floating and IShares SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Floating and IShares SPTSX
The main advantage of trading using opposite IShares Floating and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Floating 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 Floating vs. BMO Short Federal | IShares Floating vs. BMO Mid Corporate | IShares Floating vs. BMO Long Corporate |
| IShares SPTSX vs. BMO Laddered Preferred | IShares SPTSX vs. iShares SPTSX Canadian | IShares SPTSX vs. RBC Quant Canadian |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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