Correlation Between IShares SPTSX and CI Europe

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

Diversification Opportunities for IShares SPTSX and CI Europe

0.01

Correlation Coefficient

IShares SPTSX  CI Europe

Significant diversification

The 3 months correlation between IShares and EHE is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped and CI Europe Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Europe Hedged 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 CI Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Europe Hedged has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and CI Europe go up and down completely randomly.

Pair Corralation between IShares SPTSX and CI Europe

Assuming the 90 days trading horizon iShares SPTSX Capped is expected to under-perform the CI Europe. In addition to that, IShares SPTSX is 2.44 times more volatile than CI Europe Hedged. It trades about -0.06 of its total potential returns per unit of risk. CI Europe Hedged is currently generating about 0.2 per unit of volatility. If you would invest  3,140  in CI Europe Hedged on December 29, 2024 and sell it today you would earn a total of  320.00  from holding CI Europe Hedged or generate 10.19% return on investment over 90 days.

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

iShares SPTSX Capped  vs.  CI Europe Hedged

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 latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

CI Europe Hedged

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CI Europe Hedged are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, CI Europe may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares SPTSX and CI Europe

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

The idea behind iShares SPTSX Capped and CI Europe Hedged 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.