Correlation Between BetaPro Canadian and First Trust

Can any of the company-specific risk be diversified away by investing in both BetaPro Canadian and First Trust 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 Canadian and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BetaPro Canadian Gold and First Trust SMID, you can compare the effects of market volatilities on BetaPro Canadian and First Trust 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 Canadian with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro Canadian and First Trust.

Diversification Opportunities for BetaPro Canadian and First Trust

-0.26

Correlation Coefficient

BetaPro Canadian  First Trust

Very good diversification

The 3 months correlation between BetaPro and First is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro Canadian Gold and First Trust SMID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SMID and BetaPro Canadian 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 Canadian Gold are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust SMID has no effect on the direction of BetaPro Canadian i.e., BetaPro Canadian and First Trust go up and down completely randomly.

Pair Corralation between BetaPro Canadian and First Trust

Assuming the 90 days trading horizon BetaPro Canadian Gold is expected to under-perform the First Trust. In addition to that, BetaPro Canadian is 2.66 times more volatile than First Trust SMID. It trades about -0.04 of its total potential returns per unit of risk. First Trust SMID is currently generating about 0.06 per unit of volatility. If you would invest  2,092  in First Trust SMID on September 21, 2024 and sell it today you would earn a total of  111.00  from holding First Trust SMID or generate 5.31% return on investment over 90 days.

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

BetaPro Canadian Gold  vs.  First Trust SMID

BetaPro Canadian Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BetaPro Canadian Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

First Trust SMID

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust SMID are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BetaPro Canadian and First Trust

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

The idea behind BetaPro Canadian Gold and First Trust SMID 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.