Correlation Between BetaPro Equal and BetaPro Gold

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

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

Diversification Opportunities for BetaPro Equal and BetaPro Gold

0.28

Correlation Coefficient

BetaPro Equal  BetaPro Gold

Modest diversification

The 3 months correlation between BetaPro and BetaPro is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro Equal Weight and BetaPro Gold Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro Gold Bullion and BetaPro Equal 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 Equal Weight are associated (or correlated) with BetaPro Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro Gold Bullion has no effect on the direction of BetaPro Equal i.e., BetaPro Equal and BetaPro Gold go up and down completely randomly.

Pair Corralation between BetaPro Equal and BetaPro Gold

Assuming the 90 days trading horizon BetaPro Equal is expected to generate 41.74 times less return on investment than BetaPro Gold. But when comparing it to its historical volatility, BetaPro Equal Weight is 48.92 times less risky than BetaPro Gold. It trades about 0.26 of its potential returns per unit of risk. BetaPro Gold Bullion is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  607.00  in BetaPro Gold Bullion on September 5, 2024 and sell it today you would earn a total of  2,015  from holding BetaPro Gold Bullion or generate 331.96% return on investment over 90 days.

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

BetaPro Equal Weight  vs.  BetaPro Gold Bullion

BetaPro Equal Weight

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro Equal Weight are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BetaPro Equal displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with BetaPro Equal and BetaPro Gold

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

The idea behind BetaPro Equal Weight and BetaPro Gold Bullion 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.