Correlation Between SPTSX Dividend and NorthIsle Copper

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

By analyzing existing cross correlation between SPTSX Dividend Aristocrats and NorthIsle Copper and, you can compare the effects of market volatilities on SPTSX Dividend and NorthIsle Copper 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 SPTSX Dividend with a short position of NorthIsle Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPTSX Dividend and NorthIsle Copper.

Diversification Opportunities for SPTSX Dividend and NorthIsle Copper

-0.32

Correlation Coefficient

SPTSX Dividend  NorthIsle Copper

Very good diversification

The 3 months correlation between SPTSX and NorthIsle is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding SPTSX Dividend Aristocrats and NorthIsle Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthIsle Copper and SPTSX Dividend 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 SPTSX Dividend Aristocrats are associated (or correlated) with NorthIsle Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorthIsle Copper has no effect on the direction of SPTSX Dividend i.e., SPTSX Dividend and NorthIsle Copper go up and down completely randomly.

Pair Corralation between SPTSX Dividend and NorthIsle Copper

Assuming the 90 days trading horizon SPTSX Dividend Aristocrats is expected to generate 0.11 times more return on investment than NorthIsle Copper. However, SPTSX Dividend Aristocrats is 8.78 times less risky than NorthIsle Copper. It trades about 0.02 of its potential returns per unit of risk. NorthIsle Copper and is currently generating about -0.05 per unit of risk. If you would invest  35,928  in SPTSX Dividend Aristocrats on September 30, 2024 and sell it today you would earn a total of  212.00  from holding SPTSX Dividend Aristocrats or generate 0.59% return on investment over 90 days.

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

SPTSX Dividend Aristocrats  vs.  NorthIsle Copper and

Pair Trading with SPTSX Dividend and NorthIsle Copper

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

The idea behind SPTSX Dividend Aristocrats and NorthIsle Copper and 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.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.