Correlation Between IShares SPTSX and TD Canadian

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

Diversification Opportunities for IShares SPTSX and TD Canadian

0.96

Correlation Coefficient

IShares SPTSX  TD Canadian

Almost no diversification

The 3 months correlation between IShares and TTP is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX 60 and TD Canadian Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Canadian Equity 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 TD Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Canadian Equity has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and TD Canadian go up and down completely randomly.

Pair Corralation between IShares SPTSX and TD Canadian

Assuming the 90 days trading horizon iShares SPTSX 60 is expected to generate 1.02 times more return on investment than TD Canadian. However, IShares SPTSX is 1.02 times more volatile than TD Canadian Equity. It trades about 0.01 of its potential returns per unit of risk. TD Canadian Equity is currently generating about -0.01 per unit of risk. If you would invest  3,845  in iShares SPTSX 60 on December 1, 2024 and sell it today you would earn a total of  14.00  from holding iShares SPTSX 60 or generate 0.36% return on investment over 90 days.

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

iShares SPTSX 60  vs.  TD Canadian Equity

iShares SPTSX 60

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SPTSX 60 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.

TD Canadian Equity

Risk-Adjusted Performance

Very Weak

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

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

The idea behind iShares SPTSX 60 and TD Canadian Equity 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.