Correlation Between IShares SP and IShares SPTSX

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

By analyzing existing cross correlation between iShares SP Mid Cap and iShares SPTSX Capped, you can compare the effects of market volatilities on IShares SP and IShares SPTSX 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 SP with a short position of IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and IShares SPTSX.

Diversification Opportunities for IShares SP and IShares SPTSX

0.29

Correlation Coefficient

IShares SP  IShares SPTSX

Modest diversification

The 3 months correlation between IShares and IShares is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Mid Cap and iShares SPTSX Capped in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX Capped and IShares SP 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 SP Mid Cap are associated (or correlated) with IShares SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SPTSX Capped has no effect on the direction of IShares SP i.e., IShares SP and IShares SPTSX go up and down completely randomly.

Pair Corralation between IShares SP and IShares SPTSX

Assuming the 90 days trading horizon iShares SP Mid Cap is expected to generate 1.09 times more return on investment than IShares SPTSX. However, IShares SP is 1.09 times more volatile than iShares SPTSX Capped. It trades about 0.21 of its potential returns per unit of risk. iShares SPTSX Capped is currently generating about 0.07 per unit of risk. If you would invest  2,478  in iShares SP Mid Cap on April 23, 2025 and sell it today you would earn a total of  355.00  from holding iShares SP Mid Cap or generate 14.33% return on investment over 90 days.

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

iShares SP Mid Cap  vs.  iShares SPTSX Capped

iShares SP Mid

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP Mid Cap are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, IShares SP displayed solid returns over the last few months and may actually be approaching a breakup point.

iShares SPTSX Capped

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Capped are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares SPTSX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares SP and IShares SPTSX

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

The idea behind iShares SP Mid Cap and iShares SPTSX Capped 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.