Correlation Between IShares IG and IShares SPTSX
Can any of the company-specific risk be diversified away by investing in both IShares IG 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 IG 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 IG Corporate and iShares SPTSX North, you can compare the effects of market volatilities on IShares IG 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 IG with a short position of IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IG and IShares SPTSX.
Diversification Opportunities for IShares IG and IShares SPTSX
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and IShares is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding iShares IG Corporate 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 IG 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 IG Corporate 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 IG i.e., IShares IG and IShares SPTSX go up and down completely randomly.
Pair Corralation between IShares IG and IShares SPTSX
Assuming the 90 days trading horizon iShares IG Corporate is expected to generate 0.83 times more return on investment than IShares SPTSX. However, iShares IG Corporate is 1.2 times less risky than IShares SPTSX. It trades about 0.09 of its potential returns per unit of risk. iShares SPTSX North is currently generating about 0.06 per unit of risk. If you would invest 2,011 in iShares IG Corporate on September 12, 2024 and sell it today you would earn a total of 17.00 from holding iShares IG Corporate or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
iShares IG Corporate vs. iShares SPTSX North
Performance |
| Timeline |
| iShares IG Corporate |
| iShares SPTSX North |
IShares IG and IShares SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares IG and IShares SPTSX
The main advantage of trading using opposite IShares IG and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IG 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 IG vs. iShares JP Morgan | IShares IG vs. iShares High Yield | IShares IG vs. iShares 1 10Yr Laddered | IShares IG vs. iShares Canadian HYBrid |
| IShares SPTSX vs. iShares IG Corporate | IShares SPTSX vs. iShares Canadian HYBrid | IShares SPTSX vs. iShares JP Morgan | IShares SPTSX vs. iShares Floating Rate |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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