Correlation Between BetaPro Crude and BetaPro Natural

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

By analyzing existing cross correlation between BetaPro Crude Oil and BetaPro Natural Gas, you can compare the effects of market volatilities on BetaPro Crude and BetaPro Natural 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 Crude with a short position of BetaPro Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro Crude and BetaPro Natural.

Diversification Opportunities for BetaPro Crude and BetaPro Natural

0.02

Correlation Coefficient

BetaPro Crude  BetaPro Natural

Significant diversification

The 3 months correlation between BetaPro and BetaPro is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro Crude Oil and BetaPro Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro Natural Gas and BetaPro Crude 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 Crude Oil are associated (or correlated) with BetaPro Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro Natural Gas has no effect on the direction of BetaPro Crude i.e., BetaPro Crude and BetaPro Natural go up and down completely randomly.

Pair Corralation between BetaPro Crude and BetaPro Natural

Assuming the 90 days trading horizon BetaPro Crude Oil is expected to generate 0.36 times more return on investment than BetaPro Natural. However, BetaPro Crude Oil is 2.75 times less risky than BetaPro Natural. It trades about 0.03 of its potential returns per unit of risk. BetaPro Natural Gas is currently generating about -0.08 per unit of risk. If you would invest  1,141  in BetaPro Crude Oil on September 5, 2024 and sell it today you would earn a total of  39.00  from holding BetaPro Crude Oil or generate 3.42% return on investment over 90 days.

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

BetaPro Crude Oil  vs.  BetaPro Natural Gas

BetaPro Crude Oil

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro Crude Oil are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BetaPro Crude may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BetaPro Natural Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BetaPro Natural Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with BetaPro Crude and BetaPro Natural

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

The idea behind BetaPro Crude Oil and BetaPro Natural Gas 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.