Correlation Between SPTSX Dividend and Desjardins Canadian

Can any of the company-specific risk be diversified away by investing in both SPTSX Dividend 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 SPTSX Dividend and Desjardins Canadian 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 Desjardins Canadian Short, you can compare the effects of market volatilities on SPTSX Dividend 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 SPTSX Dividend with a short position of Desjardins Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPTSX Dividend and Desjardins Canadian.

Diversification Opportunities for SPTSX Dividend and Desjardins Canadian

0.36

Correlation Coefficient

SPTSX Dividend  Desjardins Canadian

Weak diversification

The 3 months correlation between SPTSX and Desjardins is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding SPTSX Dividend Aristocrats and Desjardins Canadian Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins Canadian Short 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 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 Short has no effect on the direction of SPTSX Dividend i.e., SPTSX Dividend and Desjardins Canadian go up and down completely randomly.

Pair Corralation between SPTSX Dividend and Desjardins Canadian

Assuming the 90 days trading horizon SPTSX Dividend Aristocrats is expected to generate 2.92 times more return on investment than Desjardins Canadian. However, SPTSX Dividend is 2.92 times more volatile than Desjardins Canadian Short. It trades about 0.15 of its potential returns per unit of risk. Desjardins Canadian Short is currently generating about 0.07 per unit of risk. If you would invest  35,264  in SPTSX Dividend Aristocrats on September 16, 2024 and sell it today you would earn a total of  1,452  from holding SPTSX Dividend Aristocrats or generate 4.12% return on investment over 90 days.

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

SPTSX Dividend Aristocrats  vs.  Desjardins Canadian Short

Pair Trading with SPTSX Dividend and Desjardins Canadian

The main advantage of trading using opposite SPTSX Dividend and Desjardins Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPTSX Dividend 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 SPTSX Dividend Aristocrats and Desjardins Canadian Short 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.