Correlation Between Dynamic Active and IShares SPTSX

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

By analyzing existing cross correlation between Dynamic Active Global and iShares SPTSX North, you can compare the effects of market volatilities on Dynamic Active and IShares SPTSX 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 Dynamic Active with a short position of IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynamic Active and IShares SPTSX.

Diversification Opportunities for Dynamic Active and IShares SPTSX

0.53

Correlation Coefficient

Dynamic Active  IShares SPTSX

Very weak diversification

The 3 months correlation between Dynamic and IShares is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Active Global and iShares SPTSX North in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX North and Dynamic Active 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 Dynamic Active Global are associated (or correlated) with IShares SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SPTSX North has no effect on the direction of Dynamic Active i.e., Dynamic Active and IShares SPTSX go up and down completely randomly.

Pair Corralation between Dynamic Active and IShares SPTSX

Assuming the 90 days trading horizon Dynamic Active Global is expected to generate 2.52 times more return on investment than IShares SPTSX. However, Dynamic Active is 2.52 times more volatile than iShares SPTSX North. It trades about 0.14 of its potential returns per unit of risk. iShares SPTSX North is currently generating about 0.07 per unit of risk. If you would invest  6,478  in Dynamic Active Global on October 25, 2024 and sell it today you would earn a total of  668.00  from holding Dynamic Active Global or generate 10.31% return on investment over 90 days.

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

Dynamic Active Global  vs.  iShares SPTSX North

Dynamic Active Global

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Active Global are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Dynamic Active may actually be approaching a critical reversion point that can send shares even higher in February 2025.

iShares SPTSX North

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Dynamic Active and IShares SPTSX

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

The idea behind Dynamic Active Global and iShares SPTSX North 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.