Correlation Between BetaShares Geared and ETFS Morningstar

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

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

Diversification Opportunities for BetaShares Geared and ETFS Morningstar

0.89

Correlation Coefficient

BetaShares Geared  ETFS Morningstar

Very poor diversification

The 3 months correlation between BetaShares and ETFS is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Geared Equity and ETFS Morningstar Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Morningstar Global and BetaShares Geared 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 Geared Equity are associated (or correlated) with ETFS Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Morningstar Global has no effect on the direction of BetaShares Geared i.e., BetaShares Geared and ETFS Morningstar go up and down completely randomly.

Pair Corralation between BetaShares Geared and ETFS Morningstar

Assuming the 90 days trading horizon BetaShares Geared Equity is expected to generate 1.32 times more return on investment than ETFS Morningstar. However, BetaShares Geared is 1.32 times more volatile than ETFS Morningstar Global. It trades about 0.12 of its potential returns per unit of risk. ETFS Morningstar Global is currently generating about 0.14 per unit of risk. If you would invest  4,114  in BetaShares Geared Equity on September 3, 2024 and sell it today you would earn a total of  537.00  from holding BetaShares Geared Equity or generate 13.05% return on investment over 90 days.

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

BetaShares Geared Equity  vs.  ETFS Morningstar Global

BetaShares Geared Equity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Geared Equity are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BetaShares Geared unveiled solid returns over the last few months and may actually be approaching a breakup point.

ETFS Morningstar Global

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS Morningstar Global are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ETFS Morningstar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BetaShares Geared and ETFS Morningstar

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

The idea behind BetaShares Geared Equity and ETFS Morningstar Global 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.