Correlation Between BetaPro SPTSX and Invesco 1

Can any of the company-specific risk be diversified away by investing in both BetaPro SPTSX and Invesco 1 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 Invesco 1 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 Invesco 1 3 Year, you can compare the effects of market volatilities on BetaPro SPTSX and Invesco 1 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 Invesco 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro SPTSX and Invesco 1.

Diversification Opportunities for BetaPro SPTSX and Invesco 1

0.97

Correlation Coefficient

BetaPro SPTSX  Invesco 1

Almost no diversification

The 3 months correlation between BetaPro and Invesco is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SPTSX Capped and Invesco 1 3 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco 1 3 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 Invesco 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco 1 3 has no effect on the direction of BetaPro SPTSX i.e., BetaPro SPTSX and Invesco 1 go up and down completely randomly.

Pair Corralation between BetaPro SPTSX and Invesco 1

Assuming the 90 days trading horizon BetaPro SPTSX Capped is expected to generate 24.03 times more return on investment than Invesco 1. However, BetaPro SPTSX is 24.03 times more volatile than Invesco 1 3 Year. It trades about 0.16 of its potential returns per unit of risk. Invesco 1 3 Year is currently generating about 0.32 per unit of risk. If you would invest  1,972  in BetaPro SPTSX Capped on September 14, 2024 and sell it today you would earn a total of  1,280  from holding BetaPro SPTSX Capped or generate 64.91% 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.  Invesco 1 3 Year

BetaPro SPTSX Capped

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro SPTSX Capped are ranked lower than 21 (%) 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.

Invesco 1 3

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco 1 3 Year are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Invesco 1 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 Invesco 1

The main advantage of trading using opposite BetaPro SPTSX and Invesco 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaPro SPTSX position performs unexpectedly, Invesco 1 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 Invesco 1 will offset losses from the drop in Invesco 1's long position.

The idea behind BetaPro SPTSX Capped and Invesco 1 3 Year 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.