Correlation Between BetaPro SPTSX and Energy Income

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

Diversification Opportunities for BetaPro SPTSX and Energy Income

-0.25

Correlation Coefficient

BetaPro SPTSX  Energy Income

Very good diversification

The 3 months correlation between BetaPro and Energy is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SPTSX Capped and Energy Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Income 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 Energy Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Income has no effect on the direction of BetaPro SPTSX i.e., BetaPro SPTSX and Energy Income go up and down completely randomly.

Pair Corralation between BetaPro SPTSX and Energy Income

Assuming the 90 days trading horizon BetaPro SPTSX Capped is expected to generate 0.48 times more return on investment than Energy Income. However, BetaPro SPTSX Capped is 2.07 times less risky than Energy Income. It trades about 0.04 of its potential returns per unit of risk. Energy Income is currently generating about -0.09 per unit of risk. If you would invest  3,130  in BetaPro SPTSX Capped on October 11, 2024 and sell it today you would earn a total of  46.00  from holding BetaPro SPTSX Capped or generate 1.47% return on investment over 90 days.

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

BetaPro SPTSX Capped  vs.  Energy Income

BetaPro SPTSX Capped

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro SPTSX Capped are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BetaPro SPTSX may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Energy Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Energy Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BetaPro SPTSX and Energy Income

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

The idea behind BetaPro SPTSX Capped and Energy Income 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.