Correlation Between CI Canada and SPDR Portfolio

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

By analyzing existing cross correlation between CI Canada Quality and SPDR Portfolio Emerging, you can compare the effects of market volatilities on CI Canada and SPDR Portfolio 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 Canada with a short position of SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of CI Canada and SPDR Portfolio.

Diversification Opportunities for CI Canada and SPDR Portfolio

0.45

Correlation Coefficient

CI Canada  SPDR Portfolio

Very weak diversification

The 3 months correlation between DGRC and SPDR is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding CI Canada Quality and SPDR Portfolio Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio Emerging and CI Canada 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 Canada Quality are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio Emerging has no effect on the direction of CI Canada i.e., CI Canada and SPDR Portfolio go up and down completely randomly.

Pair Corralation between CI Canada and SPDR Portfolio

Assuming the 90 days trading horizon CI Canada Quality is expected to generate 0.65 times more return on investment than SPDR Portfolio. However, CI Canada Quality is 1.55 times less risky than SPDR Portfolio. It trades about -0.04 of its potential returns per unit of risk. SPDR Portfolio Emerging is currently generating about -0.08 per unit of risk. If you would invest  3,996  in CI Canada Quality on October 23, 2024 and sell it today you would lose (61.00) from holding CI Canada Quality or give up 1.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

CI Canada Quality  vs.  SPDR Portfolio Emerging

CI Canada Quality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CI Canada Quality has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, CI Canada is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

SPDR Portfolio Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Portfolio Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, SPDR Portfolio is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CI Canada and SPDR Portfolio

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

The idea behind CI Canada Quality and SPDR Portfolio Emerging 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.