Correlation Between IShares SPTSX and Blockchain Technologies

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

Diversification Opportunities for IShares SPTSX and Blockchain Technologies

0.1

Correlation Coefficient

IShares SPTSX  Blockchain Technologies

Average diversification

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

Pair Corralation between IShares SPTSX and Blockchain Technologies

Assuming the 90 days trading horizon iShares SPTSX Capped is expected to generate 0.55 times more return on investment than Blockchain Technologies. However, iShares SPTSX Capped is 1.81 times less risky than Blockchain Technologies. It trades about 0.17 of its potential returns per unit of risk. Blockchain Technologies ETF is currently generating about 0.01 per unit of risk. If you would invest  6,636  in iShares SPTSX Capped on November 20, 2024 and sell it today you would earn a total of  1,065  from holding iShares SPTSX Capped or generate 16.05% 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.  Blockchain Technologies ETF

iShares SPTSX Capped

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Capped are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares SPTSX displayed solid returns over the last few months and may actually be approaching a breakup point.

Blockchain Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blockchain Technologies ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Blockchain Technologies 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 Blockchain Technologies

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

The idea behind iShares SPTSX Capped and Blockchain Technologies ETF 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.