Correlation Between IShares SPTSX and Purpose Floating

Can any of the company-specific risk be diversified away by investing in both IShares SPTSX and Purpose Floating 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 Purpose Floating 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 Purpose Floating Rate, you can compare the effects of market volatilities on IShares SPTSX and Purpose Floating 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 Purpose Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and Purpose Floating.

Diversification Opportunities for IShares SPTSX and Purpose Floating

0.69

Correlation Coefficient

IShares SPTSX  Purpose Floating

Poor diversification

The 3 months correlation between IShares and Purpose is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX 60 and Purpose Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purpose Floating Rate 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 Purpose Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purpose Floating Rate has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and Purpose Floating go up and down completely randomly.

Pair Corralation between IShares SPTSX and Purpose Floating

Assuming the 90 days trading horizon iShares SPTSX 60 is expected to generate 0.6 times more return on investment than Purpose Floating. However, iShares SPTSX 60 is 1.68 times less risky than Purpose Floating. It trades about 0.31 of its potential returns per unit of risk. Purpose Floating Rate is currently generating about 0.08 per unit of risk. If you would invest  3,536  in iShares SPTSX 60 on September 12, 2024 and sell it today you would earn a total of  323.00  from holding iShares SPTSX 60 or generate 9.13% return on investment over 90 days.

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

iShares SPTSX 60  vs.  Purpose Floating Rate

iShares SPTSX 60

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX 60 are ranked lower than 24 (%) 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.

Purpose Floating Rate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Purpose Floating Rate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Purpose Floating is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares SPTSX and Purpose Floating

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

The idea behind iShares SPTSX 60 and Purpose Floating Rate 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.