Correlation Between IShares SPTSX and First Asset

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

Diversification Opportunities for IShares SPTSX and First Asset

0.98

Correlation Coefficient

IShares SPTSX  First Asset

Almost no diversification

The 3 months correlation between IShares and First is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped and First Asset Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Asset Energy 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 First Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Asset Energy has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and First Asset go up and down completely randomly.

Pair Corralation between IShares SPTSX and First Asset

Assuming the 90 days trading horizon iShares SPTSX Capped is expected to generate 1.35 times more return on investment than First Asset. However, IShares SPTSX is 1.35 times more volatile than First Asset Energy. It trades about -0.07 of its potential returns per unit of risk. First Asset Energy is currently generating about -0.23 per unit of risk. If you would invest  1,935  in iShares SPTSX Capped on February 26, 2024 and sell it today you would lose (34.00) from holding iShares SPTSX Capped or give up 1.76% of portfolio value over 90 days.

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

iShares SPTSX Capped  vs.  First Asset Energy

iShares SPTSX Capped

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Capped are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, IShares SPTSX displayed solid returns over the last few months and may actually be approaching a breakup point.

First Asset Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Asset Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, First Asset may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with IShares SPTSX and First Asset

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

The idea behind iShares SPTSX Capped and First Asset Energy 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.