Correlation Between IShares SPTSX and Wealthsimple Shariah

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

Diversification Opportunities for IShares SPTSX and Wealthsimple Shariah

0.83

Correlation Coefficient

IShares SPTSX  Wealthsimple Shariah

Very poor diversification

The 3 months correlation between IShares and Wealthsimple is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX 60 and Wealthsimple Shariah World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wealthsimple Shariah 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 Wealthsimple Shariah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wealthsimple Shariah has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and Wealthsimple Shariah go up and down completely randomly.

Pair Corralation between IShares SPTSX and Wealthsimple Shariah

Assuming the 90 days trading horizon iShares SPTSX 60 is expected to generate 0.67 times more return on investment than Wealthsimple Shariah. However, iShares SPTSX 60 is 1.5 times less risky than Wealthsimple Shariah. It trades about 0.42 of its potential returns per unit of risk. Wealthsimple Shariah World is currently generating about 0.14 per unit of risk. If you would invest  3,623  in iShares SPTSX 60 on April 20, 2025 and sell it today you would earn a total of  493.00  from holding iShares SPTSX 60 or generate 13.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

iShares SPTSX 60  vs.  Wealthsimple Shariah World

iShares SPTSX 60

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX 60 are ranked lower than 33 (%) 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.

Wealthsimple Shariah

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wealthsimple Shariah World are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Wealthsimple Shariah is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares SPTSX and Wealthsimple Shariah

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

The idea behind iShares SPTSX 60 and Wealthsimple Shariah World 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.