Correlation Between IShares SPTSX and Vanguard

Can any of the company-specific risk be diversified away by investing in both IShares SPTSX and Vanguard 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 Vanguard 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 Vanguard SP 500, you can compare the effects of market volatilities on IShares SPTSX and Vanguard 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 Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and Vanguard.

Diversification Opportunities for IShares SPTSX and Vanguard

0.57

Correlation Coefficient

IShares SPTSX  Vanguard

Very weak diversification

The 3 months correlation between IShares and Vanguard is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 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 Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and Vanguard go up and down completely randomly.

Pair Corralation between IShares SPTSX and Vanguard

Assuming the 90 days trading horizon IShares SPTSX is expected to generate 1.06 times less return on investment than Vanguard. In addition to that, IShares SPTSX is 1.87 times more volatile than Vanguard SP 500. It trades about 0.16 of its total potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.31 per unit of volatility. If you would invest  8,863  in Vanguard SP 500 on April 25, 2025 and sell it today you would earn a total of  1,302  from holding Vanguard SP 500 or generate 14.69% return on investment over 90 days.

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

iShares SPTSX Capped  vs.  Vanguard SP 500

iShares SPTSX Capped

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Capped are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares SPTSX displayed solid returns over the last few months and may actually be approaching a breakup point.

Vanguard SP 500

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares SPTSX and Vanguard

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

The idea behind iShares SPTSX Capped and Vanguard SP 500 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.