Correlation Between SPTSX Dividend and Gen III

Can any of the company-specific risk be diversified away by investing in both SPTSX Dividend and Gen III 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 Gen III 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 Gen III Oil, you can compare the effects of market volatilities on SPTSX Dividend and Gen III 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 Gen III. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPTSX Dividend and Gen III.

Diversification Opportunities for SPTSX Dividend and Gen III

0.42

Correlation Coefficient

SPTSX Dividend  Gen III

Very weak diversification

The 3 months correlation between SPTSX and Gen is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding SPTSX Dividend Aristocrats and Gen III Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gen III Oil 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 Gen III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gen III Oil has no effect on the direction of SPTSX Dividend i.e., SPTSX Dividend and Gen III go up and down completely randomly.

Pair Corralation between SPTSX Dividend and Gen III

Assuming the 90 days trading horizon SPTSX Dividend Aristocrats is expected to generate 0.09 times more return on investment than Gen III. However, SPTSX Dividend Aristocrats is 11.64 times less risky than Gen III. It trades about 0.0 of its potential returns per unit of risk. Gen III Oil is currently generating about -0.11 per unit of risk. If you would invest  35,938  in SPTSX Dividend Aristocrats on December 28, 2024 and sell it today you would lose (73.00) from holding SPTSX Dividend Aristocrats or give up 0.2% of portfolio value over 90 days.

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

SPTSX Dividend Aristocrats  vs.  Gen III Oil

Pair Trading with SPTSX Dividend and Gen III

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

The idea behind SPTSX Dividend Aristocrats and Gen III Oil 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.