Correlation Between BetaPro Gold and BetaPro Crude

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

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

Diversification Opportunities for BetaPro Gold and BetaPro Crude

-0.13

Correlation Coefficient

BetaPro Gold  BetaPro Crude

Good diversification

The 3 months correlation between BetaPro and BetaPro is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro Gold Bullion and BetaPro Crude Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro Crude Oil and BetaPro Gold 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 Gold Bullion are associated (or correlated) with BetaPro Crude. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro Crude Oil has no effect on the direction of BetaPro Gold i.e., BetaPro Gold and BetaPro Crude go up and down completely randomly.

Pair Corralation between BetaPro Gold and BetaPro Crude

Assuming the 90 days trading horizon BetaPro Gold Bullion is expected to generate 8.77 times more return on investment than BetaPro Crude. However, BetaPro Gold is 8.77 times more volatile than BetaPro Crude Oil. It trades about 0.12 of its potential returns per unit of risk. BetaPro Crude Oil is currently generating about 0.01 per unit of risk. If you would invest  728.00  in BetaPro Gold Bullion on September 3, 2024 and sell it today you would earn a total of  1,880  from holding BetaPro Gold Bullion or generate 258.24% return on investment over 90 days.

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

BetaPro Gold Bullion  vs.  BetaPro Crude Oil

BetaPro Gold Bullion

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro Gold Bullion are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, BetaPro Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

BetaPro Crude Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BetaPro Crude Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, BetaPro Crude is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BetaPro Gold and BetaPro Crude

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

The idea behind BetaPro Gold Bullion and BetaPro Crude Oil 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.