Correlation Between IShares SPTSX and IShares 1

Can any of the company-specific risk be diversified away by investing in both IShares SPTSX and IShares 1 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 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares SPTSX Canadian and iShares 1 5 Year, you can compare the effects of market volatilities on IShares SPTSX and IShares 1 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 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and IShares 1.

Diversification Opportunities for IShares SPTSX and IShares 1

-0.02

Correlation Coefficient

IShares SPTSX  IShares 1

Good diversification

The 3 months correlation between IShares and IShares is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Canadian and iShares 1 5 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 1 5 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 Canadian are associated (or correlated) with IShares 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares 1 5 has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and IShares 1 go up and down completely randomly.

Pair Corralation between IShares SPTSX and IShares 1

Assuming the 90 days trading horizon IShares SPTSX is expected to generate 1.73 times less return on investment than IShares 1. In addition to that, IShares SPTSX is 1.71 times more volatile than iShares 1 5 Year. It trades about 0.06 of its total potential returns per unit of risk. iShares 1 5 Year is currently generating about 0.17 per unit of volatility. If you would invest  1,797  in iShares 1 5 Year on September 2, 2024 and sell it today you would earn a total of  34.00  from holding iShares 1 5 Year or generate 1.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

iShares SPTSX Canadian  vs.  iShares 1 5 Year

iShares SPTSX Canadian

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Canadian are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, IShares SPTSX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares 1 5

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 1 5 Year are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares 1 is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares SPTSX and IShares 1

The main advantage of trading using opposite IShares SPTSX and IShares 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SPTSX position performs unexpectedly, IShares 1 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 1 will offset losses from the drop in IShares 1's long position.

The idea behind iShares SPTSX Canadian and iShares 1 5 Year pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.