Correlation Between BetaPro Canadian and IShares Small

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

Diversification Opportunities for BetaPro Canadian and IShares Small

-0.33

Correlation Coefficient

BetaPro Canadian  IShares Small

Very good diversification

The 3 months correlation between BetaPro and IShares is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro Canadian Gold and iShares Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Small Cap 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 IShares Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Small Cap has no effect on the direction of BetaPro Canadian i.e., BetaPro Canadian and IShares Small go up and down completely randomly.

Pair Corralation between BetaPro Canadian and IShares Small

Assuming the 90 days trading horizon BetaPro Canadian is expected to generate 2.77 times less return on investment than IShares Small. In addition to that, BetaPro Canadian is 3.0 times more volatile than iShares Small Cap. It trades about 0.01 of its total potential returns per unit of risk. iShares Small Cap is currently generating about 0.1 per unit of volatility. If you would invest  4,220  in iShares Small Cap on September 14, 2024 and sell it today you would earn a total of  328.00  from holding iShares Small Cap or generate 7.77% 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.  iShares Small Cap

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 very healthy basic indicators, BetaPro Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Small Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Small Cap are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BetaPro Canadian and IShares Small

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

The idea behind BetaPro Canadian Gold and iShares Small Cap 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.