Correlation Between BetaPro SPTSX and BetaPro Equal

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

Diversification Opportunities for BetaPro SPTSX and BetaPro Equal

0.54

Correlation Coefficient

BetaPro SPTSX  BetaPro Equal

Very weak diversification

The 3 months correlation between BetaPro and BetaPro is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SPTSX Capped and BetaPro Equal Weight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro Equal Weight 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 BetaPro Equal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro Equal Weight has no effect on the direction of BetaPro SPTSX i.e., BetaPro SPTSX and BetaPro Equal go up and down completely randomly.

Pair Corralation between BetaPro SPTSX and BetaPro Equal

Assuming the 90 days trading horizon BetaPro SPTSX Capped is expected to under-perform the BetaPro Equal. In addition to that, BetaPro SPTSX is 1.05 times more volatile than BetaPro Equal Weight. It trades about -0.03 of its total potential returns per unit of risk. BetaPro Equal Weight is currently generating about 0.0 per unit of volatility. If you would invest  2,912  in BetaPro Equal Weight on December 1, 2024 and sell it today you would lose (18.00) from holding BetaPro Equal Weight or give up 0.62% of portfolio value over 90 days.

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

BetaPro SPTSX Capped  vs.  BetaPro Equal Weight

BetaPro SPTSX Capped

Risk-Adjusted Performance

Very Weak

Over the last 90 days BetaPro SPTSX Capped has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, BetaPro SPTSX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BetaPro Equal Weight

Risk-Adjusted Performance

Very Weak

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

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

The idea behind BetaPro SPTSX Capped and BetaPro Equal Weight 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.