Correlation Between SPTSX Dividend and Evolve FANGMA

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

By analyzing existing cross correlation between SPTSX Dividend Aristocrats and Evolve FANGMA Index, you can compare the effects of market volatilities on SPTSX Dividend and Evolve FANGMA 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 SPTSX Dividend with a short position of Evolve FANGMA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPTSX Dividend and Evolve FANGMA.

Diversification Opportunities for SPTSX Dividend and Evolve FANGMA

0.97

Correlation Coefficient

SPTSX Dividend  Evolve FANGMA

Almost no diversification

The 3 months correlation between SPTSX and Evolve is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding SPTSX Dividend Aristocrats and Evolve FANGMA Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolve FANGMA Index and SPTSX Dividend 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 SPTSX Dividend Aristocrats are associated (or correlated) with Evolve FANGMA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolve FANGMA Index has no effect on the direction of SPTSX Dividend i.e., SPTSX Dividend and Evolve FANGMA go up and down completely randomly.

Pair Corralation between SPTSX Dividend and Evolve FANGMA

Assuming the 90 days trading horizon SPTSX Dividend is expected to generate 2.42 times less return on investment than Evolve FANGMA. But when comparing it to its historical volatility, SPTSX Dividend Aristocrats is 3.03 times less risky than Evolve FANGMA. It trades about 0.42 of its potential returns per unit of risk. Evolve FANGMA Index is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  1,534  in Evolve FANGMA Index on April 22, 2025 and sell it today you would earn a total of  379.00  from holding Evolve FANGMA Index or generate 24.71% return on investment over 90 days.

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

SPTSX Dividend Aristocrats  vs.  Evolve FANGMA Index

Pair Trading with SPTSX Dividend and Evolve FANGMA

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

The idea behind SPTSX Dividend Aristocrats and Evolve FANGMA Index 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.