Correlation Between IShares SPTSX and CI Morningstar

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

Diversification Opportunities for IShares SPTSX and CI Morningstar

0.89

Correlation Coefficient

IShares SPTSX  CI Morningstar

Very poor diversification

The 3 months correlation between IShares and YXM-B is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX 60 and CI Morningstar Momentum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Morningstar Momentum 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 CI Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Morningstar Momentum has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and CI Morningstar go up and down completely randomly.

Pair Corralation between IShares SPTSX and CI Morningstar

Assuming the 90 days trading horizon IShares SPTSX is expected to generate 3.56 times less return on investment than CI Morningstar. But when comparing it to its historical volatility, iShares SPTSX 60 is 1.68 times less risky than CI Morningstar. It trades about 0.04 of its potential returns per unit of risk. CI Morningstar Momentum is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,542  in CI Morningstar Momentum on January 29, 2024 and sell it today you would earn a total of  1,284  from holding CI Morningstar Momentum or generate 50.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	77.62%
Values	Daily Returns

iShares SPTSX 60  vs.  CI Morningstar Momentum

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.

CI Morningstar Momentum

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CI Morningstar Momentum are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental drivers, CI Morningstar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares SPTSX and CI Morningstar

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

The idea behind iShares SPTSX 60 and CI Morningstar Momentum 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.