Correlation Between Invesco Canadian and IShares SPTSX

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

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

Diversification Opportunities for Invesco Canadian and IShares SPTSX

0.99

Correlation Coefficient

Invesco Canadian  IShares SPTSX

No risk reduction

The 3 months correlation between Invesco and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Canadian Dividend and iShares SPTSX Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX Canadian and Invesco Canadian 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 Invesco Canadian Dividend 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 Canadian has no effect on the direction of Invesco Canadian i.e., Invesco Canadian and IShares SPTSX go up and down completely randomly.

Pair Corralation between Invesco Canadian and IShares SPTSX

Assuming the 90 days trading horizon Invesco Canadian is expected to generate 1.17 times less return on investment than IShares SPTSX. But when comparing it to its historical volatility, Invesco Canadian Dividend is 1.04 times less risky than IShares SPTSX. It trades about 0.35 of its potential returns per unit of risk. iShares SPTSX Canadian is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  3,339  in iShares SPTSX Canadian on September 2, 2024 and sell it today you would earn a total of  384.00  from holding iShares SPTSX Canadian or generate 11.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Invesco Canadian Dividend  vs.  iShares SPTSX Canadian

Invesco Canadian Dividend

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Canadian Dividend are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Invesco Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares SPTSX Canadian

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Canadian are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares SPTSX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Invesco Canadian and IShares SPTSX

The main advantage of trading using opposite Invesco Canadian and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Canadian 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.

The idea behind Invesco Canadian Dividend and iShares SPTSX Canadian 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.