Correlation Between BetaShares Diversified and BetaShares Climate

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

By analyzing existing cross correlation between BetaShares Diversified High and BetaShares Climate Change, you can compare the effects of market volatilities on BetaShares Diversified and BetaShares Climate 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 Diversified with a short position of BetaShares Climate. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaShares Diversified and BetaShares Climate.

Diversification Opportunities for BetaShares Diversified and BetaShares Climate

0.3

Correlation Coefficient

BetaShares Diversified  BetaShares Climate

Weak diversification

The 3 months correlation between BetaShares and BetaShares is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Diversified High and BetaShares Climate Change in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaShares Climate Change and BetaShares Diversified 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 Diversified High are associated (or correlated) with BetaShares Climate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaShares Climate Change has no effect on the direction of BetaShares Diversified i.e., BetaShares Diversified and BetaShares Climate go up and down completely randomly.

Pair Corralation between BetaShares Diversified and BetaShares Climate

Assuming the 90 days trading horizon BetaShares Diversified is expected to generate 1.96 times less return on investment than BetaShares Climate. But when comparing it to its historical volatility, BetaShares Diversified High is 1.52 times less risky than BetaShares Climate. It trades about 0.03 of its potential returns per unit of risk. BetaShares Climate Change is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  899.00  in BetaShares Climate Change on December 2, 2024 and sell it today you would earn a total of  11.00  from holding BetaShares Climate Change or generate 1.22% return on investment over 90 days.

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

BetaShares Diversified High  vs.  BetaShares Climate Change

BetaShares Diversified

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Diversified High are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BetaShares Diversified is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

BetaShares Climate Change

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Climate Change are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BetaShares Climate is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BetaShares Diversified and BetaShares Climate

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

The idea behind BetaShares Diversified High and BetaShares Climate Change 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.