Correlation Between CI Financial and SPTSX Dividend

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

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

Diversification Opportunities for CI Financial and SPTSX Dividend

-0.36

Correlation Coefficient

CI Financial  SPTSX Dividend

Very good diversification

The 3 months correlation between CIX and SPTSX is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding CI Financial Corp and SPTSX Dividend Aristocrats in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPTSX Dividend Arist and CI Financial 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 CI Financial Corp are associated (or correlated) with SPTSX Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPTSX Dividend Arist has no effect on the direction of CI Financial i.e., CI Financial and SPTSX Dividend go up and down completely randomly.

Pair Corralation between CI Financial and SPTSX Dividend

Assuming the 90 days trading horizon CI Financial Corp is expected to generate 0.29 times more return on investment than SPTSX Dividend. However, CI Financial Corp is 3.41 times less risky than SPTSX Dividend. It trades about 0.1 of its potential returns per unit of risk. SPTSX Dividend Aristocrats is currently generating about -0.01 per unit of risk. If you would invest  3,124  in CI Financial Corp on November 29, 2024 and sell it today you would earn a total of  12.00  from holding CI Financial Corp or generate 0.38% return on investment over 90 days.

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

CI Financial Corp  vs.  SPTSX Dividend Aristocrats

Pair Trading with CI Financial and SPTSX Dividend

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

The idea behind CI Financial Corp and SPTSX Dividend Aristocrats 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.