Correlation Between IShares SPTSX and Topaz Energy

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

Diversification Opportunities for IShares SPTSX and Topaz Energy

0.85

Correlation Coefficient

IShares SPTSX  Topaz Energy

Very poor diversification

The 3 months correlation between IShares and Topaz is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped and Topaz Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topaz Energy Corp 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 Topaz Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topaz Energy Corp has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and Topaz Energy go up and down completely randomly.

Pair Corralation between IShares SPTSX and Topaz Energy

Assuming the 90 days trading horizon IShares SPTSX is expected to generate 1.11 times less return on investment than Topaz Energy. In addition to that, IShares SPTSX is 1.12 times more volatile than Topaz Energy Corp. It trades about 0.08 of its total potential returns per unit of risk. Topaz Energy Corp is currently generating about 0.09 per unit of volatility. If you would invest  2,519  in Topaz Energy Corp on September 13, 2024 and sell it today you would earn a total of  191.00  from holding Topaz Energy Corp or generate 7.58% return on investment over 90 days.

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

iShares SPTSX Capped  vs.  Topaz Energy Corp

iShares SPTSX Capped

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Capped are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, IShares SPTSX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Topaz Energy Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Topaz Energy Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Topaz Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares SPTSX and Topaz Energy

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

The idea behind iShares SPTSX Capped and Topaz Energy Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.