Correlation Between BetaPro NASDAQ and Desjardins Alt

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

Diversification Opportunities for BetaPro NASDAQ and Desjardins Alt

0.71

Correlation Coefficient

BetaPro NASDAQ  Desjardins Alt

Poor diversification

The 3 months correlation between BetaPro and Desjardins is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro NASDAQ 100 2x and Desjardins Alt LongShort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins Alt LongShort 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 Desjardins Alt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins Alt LongShort has no effect on the direction of BetaPro NASDAQ i.e., BetaPro NASDAQ and Desjardins Alt go up and down completely randomly.

Pair Corralation between BetaPro NASDAQ and Desjardins Alt

Assuming the 90 days trading horizon BetaPro NASDAQ 100 2x is expected to generate 18.5 times more return on investment than Desjardins Alt. However, BetaPro NASDAQ is 18.5 times more volatile than Desjardins Alt LongShort. It trades about 0.09 of its potential returns per unit of risk. Desjardins Alt LongShort is currently generating about 0.15 per unit of risk. If you would invest  1,002  in BetaPro NASDAQ 100 2x on October 23, 2024 and sell it today you would earn a total of  1,457  from holding BetaPro NASDAQ 100 2x or generate 145.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

BetaPro NASDAQ 100 2x  vs.  Desjardins Alt LongShort

BetaPro NASDAQ 100

Risk-Adjusted Performance

6 of 100

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 basic indicators, BetaPro NASDAQ displayed solid returns over the last few months and may actually be approaching a breakup point.

Desjardins Alt LongShort

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins Alt LongShort are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Desjardins Alt 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 Desjardins Alt

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

The idea behind BetaPro NASDAQ 100 2x and Desjardins Alt LongShort 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.