Correlation Between BetaPro SP and CI Enhanced

Can any of the company-specific risk be diversified away by investing in both BetaPro SP and CI Enhanced 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 SP and CI Enhanced into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BetaPro SP 500 and CI Enhanced Government, you can compare the effects of market volatilities on BetaPro SP and CI Enhanced 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 SP with a short position of CI Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro SP and CI Enhanced.

Diversification Opportunities for BetaPro SP and CI Enhanced

0.43

Correlation Coefficient

BetaPro SP  CI Enhanced

Very weak diversification

The 3 months correlation between BetaPro and FGO is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SP 500 and CI Enhanced Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Enhanced Government and BetaPro SP 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 SP 500 are associated (or correlated) with CI Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Enhanced Government has no effect on the direction of BetaPro SP i.e., BetaPro SP and CI Enhanced go up and down completely randomly.

Pair Corralation between BetaPro SP and CI Enhanced

Assuming the 90 days trading horizon BetaPro SP 500 is expected to under-perform the CI Enhanced. In addition to that, BetaPro SP is 4.57 times more volatile than CI Enhanced Government. It trades about -0.07 of its total potential returns per unit of risk. CI Enhanced Government is currently generating about 0.05 per unit of volatility. If you would invest  1,008  in CI Enhanced Government on December 1, 2024 and sell it today you would earn a total of  11.00  from holding CI Enhanced Government or generate 1.09% return on investment over 90 days.

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

BetaPro SP 500  vs.  CI Enhanced Government

BetaPro SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days BetaPro SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

CI Enhanced Government

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CI Enhanced Government are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CI Enhanced 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 SP and CI Enhanced

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

The idea behind BetaPro SP 500 and CI Enhanced Government 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.