Correlation Between IShares SPTSX and Dynamic Active

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

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

Diversification Opportunities for IShares SPTSX and Dynamic Active

-0.1

Correlation Coefficient

IShares SPTSX  Dynamic Active

Good diversification

The 3 months correlation between IShares and Dynamic is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped and Dynamic Active Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Active Tactical and IShares SPTSX 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 iShares SPTSX Capped are associated (or correlated) with Dynamic Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Active Tactical has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and Dynamic Active go up and down completely randomly.

Pair Corralation between IShares SPTSX and Dynamic Active

Assuming the 90 days trading horizon iShares SPTSX Capped is expected to under-perform the Dynamic Active. In addition to that, IShares SPTSX is 3.08 times more volatile than Dynamic Active Tactical. It trades about -0.01 of its total potential returns per unit of risk. Dynamic Active Tactical is currently generating about 0.05 per unit of volatility. If you would invest  1,771  in Dynamic Active Tactical on October 7, 2024 and sell it today you would earn a total of  13.00  from holding Dynamic Active Tactical or generate 0.73% return on investment over 90 days.

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

iShares SPTSX Capped  vs.  Dynamic Active Tactical

iShares SPTSX Capped

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares SPTSX Capped has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Dynamic Active Tactical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dynamic Active Tactical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Dynamic Active is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares SPTSX and Dynamic Active

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

The idea behind iShares SPTSX Capped and Dynamic Active Tactical 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.