Correlation Between IShares SPTSX and Vanguard
Can any of the company-specific risk be diversified away by investing in both IShares SPTSX and Vanguard 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 Vanguard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SPTSX 60 and Vanguard SP 500, you can compare the effects of market volatilities on IShares SPTSX and Vanguard 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 Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and Vanguard.
Diversification Opportunities for IShares SPTSX and Vanguard
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and Vanguard is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX 60 and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 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 60 are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and Vanguard go up and down completely randomly.
Pair Corralation between IShares SPTSX and Vanguard
Assuming the 90 days trading horizon iShares SPTSX 60 is expected to generate 1.09 times more return on investment than Vanguard. However, IShares SPTSX is 1.09 times more volatile than Vanguard SP 500. It trades about -0.04 of its potential returns per unit of risk. Vanguard SP 500 is currently generating about -0.09 per unit of risk. If you would invest 3,863 in iShares SPTSX 60 on November 27, 2024 and sell it today you would lose (24.00) from holding iShares SPTSX 60 or give up 0.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SPTSX 60 vs. Vanguard SP 500
Performance |
| Timeline |
| iShares SPTSX 60 |
| Vanguard SP 500 |
IShares SPTSX and Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SPTSX and Vanguard
The main advantage of trading using opposite IShares SPTSX and Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SPTSX position performs unexpectedly, Vanguard 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 Vanguard will offset losses from the drop in Vanguard's long position.| IShares SPTSX vs. iShares Core SP | IShares SPTSX vs. iShares Core SPTSX | IShares SPTSX vs. iShares SPTSX Capped | IShares SPTSX vs. iShares SPTSX Capped |
| Vanguard vs. Vanguard FTSE Canadian | Vanguard vs. Vanguard Growth Portfolio | Vanguard vs. Vanguard SP 500 | Vanguard vs. Vanguard FTSE Canada |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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