Correlation Between IShares SPTSX and Forstrong Emerging

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

By analyzing existing cross correlation between iShares SPTSX 60 and Forstrong Emerging Markets, you can compare the effects of market volatilities on IShares SPTSX and Forstrong Emerging 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 Forstrong Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and Forstrong Emerging.

Diversification Opportunities for IShares SPTSX and Forstrong Emerging

0.08

Correlation Coefficient

IShares SPTSX  Forstrong Emerging

Significant diversification

The 3 months correlation between IShares and Forstrong is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX 60 and Forstrong Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forstrong Emerging 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 60 are associated (or correlated) with Forstrong Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forstrong Emerging has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and Forstrong Emerging go up and down completely randomly.

Pair Corralation between IShares SPTSX and Forstrong Emerging

Assuming the 90 days trading horizon IShares SPTSX is expected to generate 38.69 times less return on investment than Forstrong Emerging. But when comparing it to its historical volatility, iShares SPTSX 60 is 47.76 times less risky than Forstrong Emerging. It trades about 0.08 of its potential returns per unit of risk. Forstrong Emerging Markets is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,429  in Forstrong Emerging Markets on October 11, 2024 and sell it today you would earn a total of  47.00  from holding Forstrong Emerging Markets or generate 0.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	86.67%
Values	Daily Returns

iShares SPTSX 60  vs.  Forstrong Emerging Markets

iShares SPTSX 60

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX 60 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. 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.

Forstrong Emerging

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Forstrong Emerging Markets are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Forstrong Emerging displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares SPTSX and Forstrong Emerging

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

The idea behind iShares SPTSX 60 and Forstrong Emerging Markets 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.