Correlation Between RBC Quant and IShares SPTSX

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

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

Diversification Opportunities for RBC Quant and IShares SPTSX

0.32

Correlation Coefficient

RBC Quant  IShares SPTSX

Weak diversification

The 3 months correlation between RBC and IShares is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding RBC Quant Canadian and iShares SPTSX Composite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX Composite and RBC Quant 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 RBC Quant Canadian 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 Composite has no effect on the direction of RBC Quant i.e., RBC Quant and IShares SPTSX go up and down completely randomly.

Pair Corralation between RBC Quant and IShares SPTSX

Assuming the 90 days trading horizon RBC Quant Canadian is expected to under-perform the IShares SPTSX. In addition to that, RBC Quant is 1.24 times more volatile than iShares SPTSX Composite. It trades about -0.01 of its total potential returns per unit of risk. iShares SPTSX Composite is currently generating about 0.07 per unit of volatility. If you would invest  2,720  in iShares SPTSX Composite on December 2, 2024 and sell it today you would earn a total of  20.00  from holding iShares SPTSX Composite or generate 0.74% return on investment over 90 days.

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

RBC Quant Canadian  vs.  iShares SPTSX Composite

RBC Quant Canadian

Risk-Adjusted Performance

Very Weak

Over the last 90 days RBC Quant Canadian has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

iShares SPTSX Composite

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SPTSX Composite has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward 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 RBC Quant and IShares SPTSX

The main advantage of trading using opposite RBC Quant and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Quant 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 RBC Quant Canadian and iShares SPTSX Composite 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.