Correlation Between IShares SPTSX and CI Canada

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

Diversification Opportunities for IShares SPTSX and CI Canada

0.96

Correlation Coefficient

IShares SPTSX  CI Canada

Almost no diversification

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

Pair Corralation between IShares SPTSX and CI Canada

Assuming the 90 days trading horizon IShares SPTSX is expected to generate 1.24 times less return on investment than CI Canada. But when comparing it to its historical volatility, iShares SPTSX Capped is 2.35 times less risky than CI Canada. It trades about 0.42 of its potential returns per unit of risk. CI Canada Lifeco is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,116  in CI Canada Lifeco on August 30, 2024 and sell it today you would earn a total of  81.00  from holding CI Canada Lifeco or generate 7.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

iShares SPTSX Capped  vs.  CI Canada Lifeco

iShares SPTSX Capped

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Capped are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, IShares SPTSX displayed solid returns over the last few months and may actually be approaching a breakup point.

CI Canada Lifeco

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CI Canada Lifeco are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, CI Canada displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares SPTSX and CI Canada

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

The idea behind iShares SPTSX Capped and CI Canada Lifeco 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.