Correlation Between BetaPro SP and Desjardins

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

By analyzing existing cross correlation between BetaPro SP TSX and Desjardins RI USA, you can compare the effects of market volatilities on BetaPro SP and Desjardins 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 SP with a short position of Desjardins. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro SP and Desjardins.

Diversification Opportunities for BetaPro SP and Desjardins

-0.21

Correlation Coefficient

BetaPro SP  Desjardins

Very good diversification

The 3 months correlation between BetaPro and Desjardins is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SP TSX and Desjardins RI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins RI USA and BetaPro SP 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 SP TSX are associated (or correlated) with Desjardins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins RI USA has no effect on the direction of BetaPro SP i.e., BetaPro SP and Desjardins go up and down completely randomly.

Pair Corralation between BetaPro SP and Desjardins

Assuming the 90 days trading horizon BetaPro SP is expected to generate 9.31 times less return on investment than Desjardins. In addition to that, BetaPro SP is 2.58 times more volatile than Desjardins RI USA. It trades about 0.01 of its total potential returns per unit of risk. Desjardins RI USA is currently generating about 0.21 per unit of volatility. If you would invest  4,146  in Desjardins RI USA on October 24, 2024 and sell it today you would earn a total of  484.00  from holding Desjardins RI USA or generate 11.67% return on investment over 90 days.

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

BetaPro SP TSX  vs.  Desjardins RI USA

BetaPro SP TSX

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, BetaPro SP is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Desjardins RI USA

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins RI USA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Desjardins may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BetaPro SP and Desjardins

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

The idea behind BetaPro SP TSX and Desjardins RI USA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.