Correlation Between IShares SPTSX and NBI Active

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

By analyzing existing cross correlation between iShares SPTSX Canadian and NBI Active Canadian, you can compare the effects of market volatilities on IShares SPTSX and NBI Active 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 NBI Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and NBI Active.

Diversification Opportunities for IShares SPTSX and NBI Active

0.77

Correlation Coefficient

IShares SPTSX  NBI Active

Poor diversification

The 3 months correlation between IShares and NBI is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Canadian and NBI Active Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBI Active Canadian 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 Canadian are associated (or correlated) with NBI Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBI Active Canadian has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and NBI Active go up and down completely randomly.

Pair Corralation between IShares SPTSX and NBI Active

Assuming the 90 days trading horizon IShares SPTSX is expected to generate 1.15 times less return on investment than NBI Active. But when comparing it to its historical volatility, iShares SPTSX Canadian is 1.18 times less risky than NBI Active. It trades about 0.14 of its potential returns per unit of risk. NBI Active Canadian is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,736  in NBI Active Canadian on April 19, 2025 and sell it today you would earn a total of  820.00  from holding NBI Active Canadian or generate 47.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

iShares SPTSX Canadian  vs.  NBI Active Canadian

iShares SPTSX Canadian

Risk-Adjusted Performance

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Canadian are ranked lower than 55 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, IShares SPTSX may actually be approaching a critical reversion point that can send shares even higher in August 2025.

NBI Active Canadian

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in NBI Active Canadian are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, NBI Active may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with IShares SPTSX and NBI Active

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

The idea behind iShares SPTSX Canadian and NBI Active Canadian 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.