Correlation Between BetaPro SP and Vanguard Total

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

Diversification Opportunities for BetaPro SP and Vanguard Total

0.53

Correlation Coefficient

BetaPro SP  Vanguard Total

Very weak diversification

The 3 months correlation between BetaPro and Vanguard is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SP TSX and Vanguard Total Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Market 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 Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Market has no effect on the direction of BetaPro SP i.e., BetaPro SP and Vanguard Total go up and down completely randomly.

Pair Corralation between BetaPro SP and Vanguard Total

Assuming the 90 days trading horizon BetaPro SP TSX is expected to generate 2.79 times more return on investment than Vanguard Total. However, BetaPro SP is 2.79 times more volatile than Vanguard Total Market. It trades about 0.06 of its potential returns per unit of risk. Vanguard Total Market is currently generating about -0.09 per unit of risk. If you would invest  2,527  in BetaPro SP TSX on December 23, 2024 and sell it today you would earn a total of  202.00  from holding BetaPro SP TSX or generate 7.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

BetaPro SP TSX  vs.  Vanguard Total Market

BetaPro SP TSX

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro SP TSX are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BetaPro SP may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vanguard Total Market

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Total Market has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard Total 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 Vanguard Total

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

The idea behind BetaPro SP TSX and Vanguard Total Market 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.