Correlation Between First Asset and IShares SPTSX

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

By analyzing existing cross correlation between First Asset Tech and iShares SPTSX Capped, you can compare the effects of market volatilities on First Asset and IShares SPTSX 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 First Asset with a short position of IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Asset and IShares SPTSX.

Diversification Opportunities for First Asset and IShares SPTSX

0.55

Correlation Coefficient

First Asset  IShares SPTSX

Very weak diversification

The 3 months correlation between First and IShares is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding First Asset Tech and iShares SPTSX Capped in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX Capped and First Asset 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 First Asset Tech are associated (or correlated) with IShares SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SPTSX Capped has no effect on the direction of First Asset i.e., First Asset and IShares SPTSX go up and down completely randomly.

Pair Corralation between First Asset and IShares SPTSX

Assuming the 90 days trading horizon First Asset Tech is expected to generate 0.97 times more return on investment than IShares SPTSX. However, First Asset Tech is 1.03 times less risky than IShares SPTSX. It trades about 0.05 of its potential returns per unit of risk. iShares SPTSX Capped is currently generating about 0.05 per unit of risk. If you would invest  2,066  in First Asset Tech on March 5, 2024 and sell it today you would earn a total of  19.00  from holding First Asset Tech or generate 0.92% return on investment over 90 days.

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

First Asset Tech  vs.  iShares SPTSX Capped

First Asset Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Asset Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, First Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares SPTSX Capped

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Capped are ranked lower than 6 (%) 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.

Pair Trading with First Asset and IShares SPTSX

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

The idea behind First Asset Tech and iShares SPTSX Capped 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.