Correlation Between IShares SPTSX and Harvest Bank

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

Diversification Opportunities for IShares SPTSX and Harvest Bank

0.01

Correlation Coefficient

IShares SPTSX  Harvest Bank

Significant diversification

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

Pair Corralation between IShares SPTSX and Harvest Bank

Assuming the 90 days trading horizon iShares SPTSX Capped is expected to generate 1.74 times more return on investment than Harvest Bank. However, IShares SPTSX is 1.74 times more volatile than Harvest Bank Leaders. It trades about 0.15 of its potential returns per unit of risk. Harvest Bank Leaders is currently generating about -0.05 per unit of risk. If you would invest  2,164  in iShares SPTSX Capped on September 12, 2024 and sell it today you would earn a total of  92.00  from holding iShares SPTSX Capped or generate 4.25% 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.  Harvest Bank Leaders

iShares SPTSX Capped

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Capped are ranked lower than 4 (%) 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.

Harvest Bank Leaders

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with IShares SPTSX and Harvest Bank

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

The idea behind iShares SPTSX Capped and Harvest Bank Leaders 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.