Correlation Between BetaPro NASDAQ and Invesco FTSE

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

Diversification Opportunities for BetaPro NASDAQ and Invesco FTSE

-0.45

Correlation Coefficient

BetaPro NASDAQ  Invesco FTSE

Very good diversification

The 3 months correlation between BetaPro and Invesco is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro NASDAQ 100 2x and Invesco FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE RAFI 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 Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE RAFI has no effect on the direction of BetaPro NASDAQ i.e., BetaPro NASDAQ and Invesco FTSE go up and down completely randomly.

Pair Corralation between BetaPro NASDAQ and Invesco FTSE

Assuming the 90 days trading horizon BetaPro NASDAQ 100 2x is expected to under-perform the Invesco FTSE. In addition to that, BetaPro NASDAQ is 2.3 times more volatile than Invesco FTSE RAFI. It trades about -0.04 of its total potential returns per unit of risk. Invesco FTSE RAFI is currently generating about 0.05 per unit of volatility. If you would invest  2,500  in Invesco FTSE RAFI on October 9, 2024 and sell it today you would earn a total of  46.00  from holding Invesco FTSE RAFI or generate 1.84% 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.  Invesco FTSE RAFI

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 latest unfluctuating performance, the Etf's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Invesco FTSE RAFI

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco FTSE RAFI are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Invesco FTSE is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BetaPro NASDAQ and Invesco FTSE

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

The idea behind BetaPro NASDAQ 100 2x and Invesco FTSE RAFI 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.