Correlation Between BetaPro SP and Dynamic Active

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

Diversification Opportunities for BetaPro SP and Dynamic Active

-0.32

Correlation Coefficient

BetaPro SP  Dynamic Active

Very good diversification

The 3 months correlation between BetaPro and Dynamic is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SP TSX and Dynamic Active Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Active Tactical 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 Dynamic Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Active Tactical has no effect on the direction of BetaPro SP i.e., BetaPro SP and Dynamic Active go up and down completely randomly.

Pair Corralation between BetaPro SP and Dynamic Active

Assuming the 90 days trading horizon BetaPro SP TSX is expected to generate 5.92 times more return on investment than Dynamic Active. However, BetaPro SP is 5.92 times more volatile than Dynamic Active Tactical. It trades about 0.0 of its potential returns per unit of risk. Dynamic Active Tactical is currently generating about -0.01 per unit of risk. If you would invest  2,928  in BetaPro SP TSX on October 22, 2024 and sell it today you would lose (49.00) from holding BetaPro SP TSX or give up 1.67% of portfolio value over 90 days.

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

BetaPro SP TSX  vs.  Dynamic Active Tactical

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.

Dynamic Active Tactical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dynamic Active Tactical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Dynamic Active 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 SP and Dynamic Active

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

The idea behind BetaPro SP TSX and Dynamic Active Tactical 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.