Correlation Between BetaShares Diversified and BetaShares Managed

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

Diversification Opportunities for BetaShares Diversified and BetaShares Managed

0.98

Correlation Coefficient

BetaShares Diversified  BetaShares Managed

Almost no diversification

The 3 months correlation between BetaShares and BetaShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Diversified High and BetaShares Managed Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaShares Managed Risk 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 Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaShares Managed Risk has no effect on the direction of BetaShares Diversified i.e., BetaShares Diversified and BetaShares Managed go up and down completely randomly.

Pair Corralation between BetaShares Diversified and BetaShares Managed

Assuming the 90 days trading horizon BetaShares Diversified is expected to generate 1.15 times less return on investment than BetaShares Managed. But when comparing it to its historical volatility, BetaShares Diversified High is 1.29 times less risky than BetaShares Managed. It trades about 0.26 of its potential returns per unit of risk. BetaShares Managed Risk is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,877  in BetaShares Managed Risk on September 12, 2024 and sell it today you would earn a total of  188.00  from holding BetaShares Managed Risk or generate 10.02% return on investment over 90 days.

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

BetaShares Diversified High  vs.  BetaShares Managed Risk

BetaShares Diversified

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Diversified High are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BetaShares Diversified may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BetaShares Managed Risk

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Managed Risk are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BetaShares Managed may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BetaShares Diversified and BetaShares Managed

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

The idea behind BetaShares Diversified High and BetaShares Managed Risk 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.