Correlation Between BetaPro SPTSX and Dynamic Active

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

Diversification Opportunities for BetaPro SPTSX and Dynamic Active

0.91

Correlation Coefficient

BetaPro SPTSX  Dynamic Active

Almost no diversification

The 3 months correlation between BetaPro and Dynamic is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SPTSX Capped and Dynamic Active Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Active Ultra 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 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 Ultra has no effect on the direction of BetaPro SPTSX i.e., BetaPro SPTSX and Dynamic Active go up and down completely randomly.

Pair Corralation between BetaPro SPTSX and Dynamic Active

Assuming the 90 days trading horizon BetaPro SPTSX Capped is expected to generate 6.93 times more return on investment than Dynamic Active. However, BetaPro SPTSX is 6.93 times more volatile than Dynamic Active Ultra. It trades about 0.09 of its potential returns per unit of risk. Dynamic Active Ultra is currently generating about 0.11 per unit of risk. If you would invest  1,729  in BetaPro SPTSX Capped on September 13, 2024 and sell it today you would earn a total of  1,523  from holding BetaPro SPTSX Capped or generate 88.09% return on investment over 90 days.

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

BetaPro SPTSX Capped  vs.  Dynamic Active Ultra

BetaPro SPTSX Capped

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro SPTSX Capped are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BetaPro SPTSX displayed solid returns over the last few months and may actually be approaching a breakup point.

Dynamic Active Ultra

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Active Ultra are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, 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 SPTSX and Dynamic Active

The main advantage of trading using opposite BetaPro SPTSX and Dynamic Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaPro SPTSX 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 SPTSX Capped and Dynamic Active Ultra 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.