Correlation Between BetaPro Equal and BetaPro SP

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

Diversification Opportunities for BetaPro Equal and BetaPro SP

-0.2

Correlation Coefficient

BetaPro Equal  BetaPro SP

Good diversification

The 3 months correlation between BetaPro and BetaPro is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro Equal Weight and BetaPro SP TSX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro SP TSX 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro SP TSX has no effect on the direction of BetaPro Equal i.e., BetaPro Equal and BetaPro SP go up and down completely randomly.

Pair Corralation between BetaPro Equal and BetaPro SP

Assuming the 90 days trading horizon BetaPro Equal Weight is expected to generate 0.5 times more return on investment than BetaPro SP. However, BetaPro Equal Weight is 1.99 times less risky than BetaPro SP. It trades about 0.0 of its potential returns per unit of risk. BetaPro SP TSX is currently generating about -0.08 per unit of risk. If you would invest  2,912  in BetaPro Equal Weight on December 2, 2024 and sell it today you would lose (18.00) from holding BetaPro Equal Weight or give up 0.62% of portfolio value over 90 days.

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

BetaPro Equal Weight  vs.  BetaPro SP TSX

BetaPro Equal Weight

Risk-Adjusted Performance

Very Weak

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

BetaPro SP TSX

Risk-Adjusted Performance

Very Weak

Over the last 90 days BetaPro SP TSX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with BetaPro Equal and BetaPro SP

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

The idea behind BetaPro Equal Weight and BetaPro SP TSX 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.