Correlation Between BetaPro Inverse and BetaPro SP

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

By analyzing existing cross correlation between BetaPro Inverse Bitcoin and BetaPro SP 500, you can compare the effects of market volatilities on BetaPro Inverse and BetaPro 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 BetaPro Inverse with a short position of BetaPro SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro Inverse and BetaPro SP.

Diversification Opportunities for BetaPro Inverse and BetaPro SP

0.8

Correlation Coefficient

BetaPro Inverse  BetaPro SP

Very poor diversification

The 3 months correlation between BetaPro and BetaPro is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro Inverse Bitcoin and BetaPro SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro SP 500 and BetaPro Inverse 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 BetaPro Inverse Bitcoin are associated (or correlated) with BetaPro SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro SP 500 has no effect on the direction of BetaPro Inverse i.e., BetaPro Inverse and BetaPro SP go up and down completely randomly.

Pair Corralation between BetaPro Inverse and BetaPro SP

Assuming the 90 days trading horizon BetaPro Inverse Bitcoin is expected to under-perform the BetaPro SP. In addition to that, BetaPro Inverse is 1.06 times more volatile than BetaPro SP 500. It trades about -0.22 of its total potential returns per unit of risk. BetaPro SP 500 is currently generating about -0.05 per unit of volatility. If you would invest  864.00  in BetaPro SP 500 on September 13, 2024 and sell it today you would lose (115.00) from holding BetaPro SP 500 or give up 13.31% of portfolio value over 90 days.

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

BetaPro Inverse Bitcoin  vs.  BetaPro SP 500

BetaPro Inverse Bitcoin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BetaPro Inverse Bitcoin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

BetaPro SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BetaPro SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with BetaPro Inverse and BetaPro SP

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

The idea behind BetaPro Inverse Bitcoin and BetaPro 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.