Correlation Between BetaPro NASDAQ and Energy Income

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

Diversification Opportunities for BetaPro NASDAQ and Energy Income

-0.55

Correlation Coefficient

BetaPro NASDAQ  Energy Income

Excellent diversification

The 3 months correlation between BetaPro and Energy is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro NASDAQ 100 2x and Energy Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Income 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 Energy Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Income has no effect on the direction of BetaPro NASDAQ i.e., BetaPro NASDAQ and Energy Income go up and down completely randomly.

Pair Corralation between BetaPro NASDAQ and Energy Income

Assuming the 90 days trading horizon BetaPro NASDAQ 100 2x is expected to under-perform the Energy Income. In addition to that, BetaPro NASDAQ is 1.16 times more volatile than Energy Income. It trades about -0.15 of its total potential returns per unit of risk. Energy Income is currently generating about 0.08 per unit of volatility. If you would invest  152.00  in Energy Income on September 12, 2024 and sell it today you would earn a total of  11.00  from holding Energy Income or generate 7.24% 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.  Energy Income

BetaPro NASDAQ 100

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BetaPro NASDAQ 100 2x 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.

Energy Income

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Income are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Energy Income may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BetaPro NASDAQ and Energy Income

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

The idea behind BetaPro NASDAQ 100 2x and Energy Income 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.