Correlation Between IShares SPTSX and IShares Global

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

Diversification Opportunities for IShares SPTSX and IShares Global

0.47

Correlation Coefficient

IShares SPTSX  IShares Global

Very weak diversification

The 3 months correlation between IShares and IShares is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped and iShares Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Real 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 IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Real has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and IShares Global go up and down completely randomly.

Pair Corralation between IShares SPTSX and IShares Global

Assuming the 90 days trading horizon iShares SPTSX Capped is expected to generate 1.16 times more return on investment than IShares Global. However, IShares SPTSX is 1.16 times more volatile than iShares Global Real. It trades about 0.07 of its potential returns per unit of risk. iShares Global Real is currently generating about -0.04 per unit of risk. If you would invest  2,787  in iShares SPTSX Capped on September 12, 2024 and sell it today you would earn a total of  84.00  from holding iShares SPTSX Capped or generate 3.01% return on investment over 90 days.

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

iShares SPTSX Capped  vs.  iShares Global Real

iShares SPTSX Capped

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Capped are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic 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 Global Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Global 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 Global

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

The idea behind iShares SPTSX Capped and iShares Global Real 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.