Correlation Between BetaPro SP and Harvest Microsoft

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

By analyzing existing cross correlation between BetaPro SP 500 and Harvest Microsoft Enhanced, you can compare the effects of market volatilities on BetaPro SP and Harvest Microsoft 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 SP with a short position of Harvest Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro SP and Harvest Microsoft.

Diversification Opportunities for BetaPro SP and Harvest Microsoft

-0.3

Correlation Coefficient

BetaPro SP  Harvest Microsoft

Very good diversification

The 3 months correlation between BetaPro and Harvest is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SP 500 and Harvest Microsoft Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Microsoft and BetaPro SP 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 SP 500 are associated (or correlated) with Harvest Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Microsoft has no effect on the direction of BetaPro SP i.e., BetaPro SP and Harvest Microsoft go up and down completely randomly.

Pair Corralation between BetaPro SP and Harvest Microsoft

Assuming the 90 days trading horizon BetaPro SP 500 is expected to generate 0.54 times more return on investment than Harvest Microsoft. However, BetaPro SP 500 is 1.85 times less risky than Harvest Microsoft. It trades about 0.08 of its potential returns per unit of risk. Harvest Microsoft Enhanced is currently generating about -0.06 per unit of risk. If you would invest  1,070  in BetaPro SP 500 on December 3, 2024 and sell it today you would earn a total of  41.00  from holding BetaPro SP 500 or generate 3.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

BetaPro SP 500  vs.  Harvest Microsoft Enhanced

BetaPro SP 500

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro SP 500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BetaPro SP is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Harvest Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harvest Microsoft Enhanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Harvest Microsoft 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 SP and Harvest Microsoft

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

The idea behind BetaPro SP 500 and Harvest Microsoft Enhanced 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.