Correlation Between BetaPro NASDAQ and CIBC Canadian

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

By analyzing existing cross correlation between BetaPro NASDAQ 100 2x and CIBC Canadian Equity, you can compare the effects of market volatilities on BetaPro NASDAQ and CIBC Canadian 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 NASDAQ with a short position of CIBC Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro NASDAQ and CIBC Canadian.

Diversification Opportunities for BetaPro NASDAQ and CIBC Canadian

-0.51

Correlation Coefficient

BetaPro NASDAQ  CIBC Canadian

Excellent diversification

The 3 months correlation between BetaPro and CIBC is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro NASDAQ 100 2x and CIBC Canadian Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Canadian Equity and BetaPro NASDAQ 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 NASDAQ 100 2x are associated (or correlated) with CIBC Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Canadian Equity has no effect on the direction of BetaPro NASDAQ i.e., BetaPro NASDAQ and CIBC Canadian go up and down completely randomly.

Pair Corralation between BetaPro NASDAQ and CIBC Canadian

Assuming the 90 days trading horizon BetaPro NASDAQ 100 2x is expected to generate 3.3 times more return on investment than CIBC Canadian. However, BetaPro NASDAQ is 3.3 times more volatile than CIBC Canadian Equity. It trades about 0.09 of its potential returns per unit of risk. CIBC Canadian Equity is currently generating about 0.03 per unit of risk. If you would invest  1,027  in BetaPro NASDAQ 100 2x on December 29, 2024 and sell it today you would earn a total of  137.00  from holding BetaPro NASDAQ 100 2x or generate 13.34% return on investment over 90 days.

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

BetaPro NASDAQ 100 2x  vs.  CIBC Canadian Equity

BetaPro NASDAQ 100

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro NASDAQ 100 2x are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, BetaPro NASDAQ displayed solid returns over the last few months and may actually be approaching a breakup point.

CIBC Canadian Equity

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CIBC Canadian Equity are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CIBC Canadian is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BetaPro NASDAQ and CIBC Canadian

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

The idea behind BetaPro NASDAQ 100 2x and CIBC Canadian Equity 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.