Correlation Between BetaPro SPTSX and First Trust

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

By analyzing existing cross correlation between BetaPro SPTSX Capped and First Trust Morningstar, you can compare the effects of market volatilities on BetaPro SPTSX and First Trust 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 SPTSX with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro SPTSX and First Trust.

Diversification Opportunities for BetaPro SPTSX and First Trust

0.42

Correlation Coefficient

BetaPro SPTSX  First Trust

Very weak diversification

The 3 months correlation between BetaPro and First is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SPTSX Capped and First Trust Morningstar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Morningstar and BetaPro SPTSX 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 SPTSX Capped are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Morningstar has no effect on the direction of BetaPro SPTSX i.e., BetaPro SPTSX and First Trust go up and down completely randomly.

Pair Corralation between BetaPro SPTSX and First Trust

Assuming the 90 days trading horizon BetaPro SPTSX Capped is expected to under-perform the First Trust. In addition to that, BetaPro SPTSX is 3.27 times more volatile than First Trust Morningstar. It trades about -0.07 of its total potential returns per unit of risk. First Trust Morningstar is currently generating about 0.13 per unit of volatility. If you would invest  3,346  in First Trust Morningstar on December 27, 2024 and sell it today you would earn a total of  222.00  from holding First Trust Morningstar or generate 6.63% return on investment over 90 days.

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

BetaPro SPTSX Capped  vs.  First Trust Morningstar

BetaPro SPTSX Capped

Risk-Adjusted Performance

Very Weak

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

First Trust Morningstar

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Morningstar are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BetaPro SPTSX and First Trust

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

The idea behind BetaPro SPTSX Capped and First Trust Morningstar 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.