Correlation Between IShares Core and Brompton European

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

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

Diversification Opportunities for IShares Core and Brompton European

0.23

Correlation Coefficient

IShares Core  Brompton European

Modest diversification

The 3 months correlation between IShares and Brompton is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SPTSX and Brompton European Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton European and IShares Core 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 Core SPTSX are associated (or correlated) with Brompton European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton European has no effect on the direction of IShares Core i.e., IShares Core and Brompton European go up and down completely randomly.

Pair Corralation between IShares Core and Brompton European

Assuming the 90 days trading horizon IShares Core is expected to generate 4.91 times less return on investment than Brompton European. But when comparing it to its historical volatility, iShares Core SPTSX is 1.28 times less risky than Brompton European. It trades about 0.03 of its potential returns per unit of risk. Brompton European Dividend is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,031  in Brompton European Dividend on December 29, 2024 and sell it today you would earn a total of  74.00  from holding Brompton European Dividend or generate 7.18% return on investment over 90 days.

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

iShares Core SPTSX  vs.  Brompton European Dividend

iShares Core SPTSX

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SPTSX are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, IShares Core is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Brompton European

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton European Dividend are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brompton European may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares Core and Brompton European

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

The idea behind iShares Core SPTSX and Brompton European Dividend 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..