Correlation Between BetaPro NASDAQ and BMO MSCI

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

Diversification Opportunities for BetaPro NASDAQ and BMO MSCI

-0.17

Correlation Coefficient

BetaPro NASDAQ  BMO MSCI

Good diversification

The 3 months correlation between BetaPro and BMO is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro NASDAQ 100 2x and BMO MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI Europe 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO MSCI Europe has no effect on the direction of BetaPro NASDAQ i.e., BetaPro NASDAQ and BMO MSCI go up and down completely randomly.

Pair Corralation between BetaPro NASDAQ and BMO MSCI

Assuming the 90 days trading horizon BetaPro NASDAQ 100 2x is expected to under-perform the BMO MSCI. In addition to that, BetaPro NASDAQ is 3.9 times more volatile than BMO MSCI Europe. It trades about -0.08 of its total potential returns per unit of risk. BMO MSCI Europe is currently generating about 0.11 per unit of volatility. If you would invest  2,929  in BMO MSCI Europe on December 29, 2024 and sell it today you would earn a total of  137.00  from holding BMO MSCI Europe or generate 4.68% return on investment over 90 days.

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

BetaPro NASDAQ 100 2x  vs.  BMO MSCI Europe

BetaPro NASDAQ 100

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

BMO MSCI Europe

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BMO MSCI Europe are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO MSCI 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 MSCI

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

The idea behind BetaPro NASDAQ 100 2x and BMO MSCI Europe 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.