Correlation Between IShares SPTSX and Purpose Canadian

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

Diversification Opportunities for IShares SPTSX and Purpose Canadian

0.87

Correlation Coefficient

IShares SPTSX  Purpose Canadian

Very poor diversification

The 3 months correlation between IShares and Purpose is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped and Purpose Canadian Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purpose Canadian Fin 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 Purpose Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purpose Canadian Fin has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and Purpose Canadian go up and down completely randomly.

Pair Corralation between IShares SPTSX and Purpose Canadian

Assuming the 90 days trading horizon iShares SPTSX Capped is expected to under-perform the Purpose Canadian. But the etf apears to be less risky and, when comparing its historical volatility, iShares SPTSX Capped is 1.19 times less risky than Purpose Canadian. The etf trades about -0.03 of its potential returns per unit of risk. The Purpose Canadian Financial is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,741  in Purpose Canadian Financial on December 30, 2024 and sell it today you would lose (54.00) from holding Purpose Canadian Financial or give up 1.97% of portfolio value over 90 days.

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

iShares SPTSX Capped  vs.  Purpose Canadian Financial

iShares SPTSX Capped

Risk-Adjusted Performance

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 basic indicators, IShares SPTSX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Purpose Canadian Fin

Risk-Adjusted Performance

Very Weak

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

Pair Trading with IShares SPTSX and Purpose Canadian

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

The idea behind iShares SPTSX Capped and Purpose Canadian Financial 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.