Correlation Between IShares SPTSX and BetaPro SP

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

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

Diversification Opportunities for IShares SPTSX and BetaPro SP

-0.93

Correlation Coefficient

IShares SPTSX  BetaPro SP

Pay attention - limited upside

The 3 months correlation between IShares and BetaPro is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped and BetaPro SP TSX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro SP TSX 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 Capped are associated (or correlated) with BetaPro SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro SP TSX has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and BetaPro SP go up and down completely randomly.

Pair Corralation between IShares SPTSX and BetaPro SP

Assuming the 90 days trading horizon iShares SPTSX Capped is expected to generate 1.01 times more return on investment than BetaPro SP. However, IShares SPTSX is 1.01 times more volatile than BetaPro SP TSX. It trades about 0.1 of its potential returns per unit of risk. BetaPro SP TSX is currently generating about -0.17 per unit of risk. If you would invest  5,087  in iShares SPTSX Capped on September 4, 2024 and sell it today you would earn a total of  1,892  from holding iShares SPTSX Capped or generate 37.19% return on investment over 90 days.

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

iShares SPTSX Capped  vs.  BetaPro SP TSX

iShares SPTSX Capped

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Capped are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, IShares SPTSX displayed solid returns over the last few months and may actually be approaching a breakup point.

BetaPro SP TSX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BetaPro SP TSX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with IShares SPTSX and BetaPro SP

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

The idea behind iShares SPTSX Capped and BetaPro SP TSX 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.