Correlation Between SPTSX Dividend and Added Capital

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

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

Diversification Opportunities for SPTSX Dividend and Added Capital

0.0

Correlation Coefficient

SPTSX Dividend  Added Capital

Pay attention - limited upside

The 3 months correlation between SPTSX and Added is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SPTSX Dividend Aristocrats and Added Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Added Capital and SPTSX Dividend 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 SPTSX Dividend Aristocrats are associated (or correlated) with Added Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Added Capital has no effect on the direction of SPTSX Dividend i.e., SPTSX Dividend and Added Capital go up and down completely randomly.

Pair Corralation between SPTSX Dividend and Added Capital

If you would invest  31,617  in SPTSX Dividend Aristocrats on October 23, 2024 and sell it today you would earn a total of  4,367  from holding SPTSX Dividend Aristocrats or generate 13.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

SPTSX Dividend Aristocrats  vs.  Added Capital

Pair Trading with SPTSX Dividend and Added Capital

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

The idea behind SPTSX Dividend Aristocrats and Added Capital 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.