Correlation Between BetaPro SPTSX and Purpose Canadian

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

By analyzing existing cross correlation between BetaPro SPTSX 60 and Purpose Canadian Financial, you can compare the effects of market volatilities on BetaPro SPTSX and Purpose Canadian 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 SPTSX with a short position of Purpose Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro SPTSX and Purpose Canadian.

Diversification Opportunities for BetaPro SPTSX and Purpose Canadian

-0.48

Correlation Coefficient

BetaPro SPTSX  Purpose Canadian

Very good diversification

The 3 months correlation between BetaPro and Purpose is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SPTSX 60 and Purpose Canadian Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purpose Canadian Fin and BetaPro SPTSX 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 SPTSX 60 are associated (or correlated) with Purpose Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purpose Canadian Fin has no effect on the direction of BetaPro SPTSX i.e., BetaPro SPTSX and Purpose Canadian go up and down completely randomly.

Pair Corralation between BetaPro SPTSX and Purpose Canadian

Assuming the 90 days trading horizon BetaPro SPTSX 60 is expected to under-perform the Purpose Canadian. In addition to that, BetaPro SPTSX is 1.52 times more volatile than Purpose Canadian Financial. It trades about -0.05 of its total potential returns per unit of risk. Purpose Canadian Financial is currently generating about -0.02 per unit of volatility. If you would invest  2,741  in Purpose Canadian Financial on December 30, 2024 and sell it today you would lose (54.00) from holding Purpose Canadian Financial or give up 1.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

BetaPro SPTSX 60  vs.  Purpose Canadian Financial

BetaPro SPTSX 60

Risk-Adjusted Performance

Very Weak

Over the last 90 days BetaPro SPTSX 60 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, BetaPro SPTSX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Purpose Canadian Fin

Risk-Adjusted Performance

Very Weak

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

Pair Trading with BetaPro SPTSX and Purpose Canadian

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

The idea behind BetaPro SPTSX 60 and Purpose Canadian Financial 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.