Correlation Between BetaPro NASDAQ and BMO Sustainable

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

Diversification Opportunities for BetaPro NASDAQ and BMO Sustainable

-0.4

Correlation Coefficient

BetaPro NASDAQ  BMO Sustainable

Very good diversification

The 3 months correlation between BetaPro and BMO is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro NASDAQ 100 2x and BMO Sustainable Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Sustainable Global 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 BMO Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Sustainable Global has no effect on the direction of BetaPro NASDAQ i.e., BetaPro NASDAQ and BMO Sustainable go up and down completely randomly.

Pair Corralation between BetaPro NASDAQ and BMO Sustainable

Assuming the 90 days trading horizon BetaPro NASDAQ 100 2x is expected to generate 38.07 times more return on investment than BMO Sustainable. However, BetaPro NASDAQ is 38.07 times more volatile than BMO Sustainable Global. It trades about 0.03 of its potential returns per unit of risk. BMO Sustainable Global is currently generating about 0.06 per unit of risk. If you would invest  696.00  in BetaPro NASDAQ 100 2x on October 25, 2024 and sell it today you would earn a total of  309.00  from holding BetaPro NASDAQ 100 2x or generate 44.4% 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.  BMO Sustainable Global

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.

BMO Sustainable Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BMO Sustainable Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, BMO Sustainable is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BetaPro NASDAQ and BMO Sustainable

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

The idea behind BetaPro NASDAQ 100 2x and BMO Sustainable Global 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.