Correlation Between BetaShares Australia and ETFS SP

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

By analyzing existing cross correlation between BetaShares Australia 200 and ETFS SP Biotech, you can compare the effects of market volatilities on BetaShares Australia and ETFS SP 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 BetaShares Australia with a short position of ETFS SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaShares Australia and ETFS SP.

Diversification Opportunities for BetaShares Australia and ETFS SP

0.33

Correlation Coefficient

BetaShares Australia  ETFS SP

Weak diversification

The 3 months correlation between BetaShares and ETFS is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Australia 200 and ETFS SP Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS SP Biotech and BetaShares Australia 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 BetaShares Australia 200 are associated (or correlated) with ETFS SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS SP Biotech has no effect on the direction of BetaShares Australia i.e., BetaShares Australia and ETFS SP go up and down completely randomly.

Pair Corralation between BetaShares Australia and ETFS SP

Assuming the 90 days trading horizon BetaShares Australia 200 is expected to generate 0.5 times more return on investment than ETFS SP. However, BetaShares Australia 200 is 1.99 times less risky than ETFS SP. It trades about 0.0 of its potential returns per unit of risk. ETFS SP Biotech is currently generating about -0.07 per unit of risk. If you would invest  13,637  in BetaShares Australia 200 on December 2, 2024 and sell it today you would lose (2.00) from holding BetaShares Australia 200 or give up 0.01% of portfolio value over 90 days.

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

BetaShares Australia 200  vs.  ETFS SP Biotech

BetaShares Australia 200

Risk-Adjusted Performance

Very Weak

Over the last 90 days BetaShares Australia 200 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BetaShares Australia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

ETFS SP Biotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETFS SP Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with BetaShares Australia and ETFS SP

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

The idea behind BetaShares Australia 200 and ETFS SP Biotech 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.