Correlation Between IShares SPTSX and Desjardins Canadian

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

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

Diversification Opportunities for IShares SPTSX and Desjardins Canadian

0.97

Correlation Coefficient

IShares SPTSX  Desjardins Canadian

Almost no diversification

The 3 months correlation between IShares and Desjardins is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Canadian and Desjardins Canadian Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins Canadian 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 Canadian are associated (or correlated) with Desjardins Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins Canadian has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and Desjardins Canadian go up and down completely randomly.

Pair Corralation between IShares SPTSX and Desjardins Canadian

Assuming the 90 days trading horizon iShares SPTSX Canadian is expected to generate 0.52 times more return on investment than Desjardins Canadian. However, iShares SPTSX Canadian is 1.93 times less risky than Desjardins Canadian. It trades about 0.16 of its potential returns per unit of risk. Desjardins Canadian Preferred is currently generating about -0.01 per unit of risk. If you would invest  1,272  in iShares SPTSX Canadian on December 2, 2024 and sell it today you would earn a total of  10.00  from holding iShares SPTSX Canadian or generate 0.79% return on investment over 90 days.

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

iShares SPTSX Canadian  vs.  Desjardins Canadian Preferred

iShares SPTSX Canadian

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Canadian are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, IShares SPTSX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Desjardins Canadian

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins Canadian Preferred are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Desjardins Canadian 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 Desjardins Canadian

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

The idea behind iShares SPTSX Canadian and Desjardins Canadian Preferred 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.