Correlation Between BetaPro NASDAQ and Purpose Core

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

Diversification Opportunities for BetaPro NASDAQ and Purpose Core

0.36

Correlation Coefficient

BetaPro NASDAQ  Purpose Core

Weak diversification

The 3 months correlation between BetaPro and Purpose is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro NASDAQ 100 2x and Purpose Core Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purpose Core Dividend 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 Purpose Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purpose Core Dividend has no effect on the direction of BetaPro NASDAQ i.e., BetaPro NASDAQ and Purpose Core go up and down completely randomly.

Pair Corralation between BetaPro NASDAQ and Purpose Core

Assuming the 90 days trading horizon BetaPro NASDAQ 100 2x is expected to generate 5.34 times more return on investment than Purpose Core. However, BetaPro NASDAQ is 5.34 times more volatile than Purpose Core Dividend. It trades about 0.09 of its potential returns per unit of risk. Purpose Core Dividend is currently generating about 0.15 per unit of risk. If you would invest  1,027  in BetaPro NASDAQ 100 2x on December 30, 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 Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

BetaPro NASDAQ 100 2x  vs.  Purpose Core Dividend

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.

Purpose Core Dividend

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Purpose Core Dividend are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Purpose Core is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BetaPro NASDAQ and Purpose Core

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

The idea behind BetaPro NASDAQ 100 2x and Purpose Core Dividend 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.