Correlation Between BetaPro NASDAQ and BetaPro SPTSX

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

Diversification Opportunities for BetaPro NASDAQ and BetaPro SPTSX

0.15

Correlation Coefficient

BetaPro NASDAQ  BetaPro SPTSX

Average diversification

The 3 months correlation between BetaPro and BetaPro is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro NASDAQ 100 2x and BetaPro SPTSX Capped in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro SPTSX Capped 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 BetaPro SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro SPTSX Capped has no effect on the direction of BetaPro NASDAQ i.e., BetaPro NASDAQ and BetaPro SPTSX go up and down completely randomly.

Pair Corralation between BetaPro NASDAQ and BetaPro SPTSX

Assuming the 90 days trading horizon BetaPro NASDAQ is expected to generate 26.02 times less return on investment than BetaPro SPTSX. But when comparing it to its historical volatility, BetaPro NASDAQ 100 2x is 30.78 times less risky than BetaPro SPTSX. It trades about 0.15 of its potential returns per unit of risk. BetaPro SPTSX Capped is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  419.00  in BetaPro SPTSX Capped on September 2, 2024 and sell it today you would earn a total of  1,900  from holding BetaPro SPTSX Capped or generate 453.46% return on investment over 90 days.

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

BetaPro NASDAQ 100 2x  vs.  BetaPro SPTSX Capped

BetaPro NASDAQ 100

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro NASDAQ 100 2x are ranked lower than 11 (%) 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.

BetaPro SPTSX Capped

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro SPTSX Capped are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, BetaPro SPTSX displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BetaPro NASDAQ and BetaPro SPTSX

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

The idea behind BetaPro NASDAQ 100 2x and BetaPro SPTSX Capped 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.