Correlation Between BetaPro SPTSX and First Trust

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

Diversification Opportunities for BetaPro SPTSX and First Trust

-0.79

Correlation Coefficient

BetaPro SPTSX  First Trust

Pay attention - limited upside

The 3 months correlation between BetaPro and First is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SPTSX 60 and First Trust SMID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SMID 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust SMID has no effect on the direction of BetaPro SPTSX i.e., BetaPro SPTSX and First Trust go up and down completely randomly.

Pair Corralation between BetaPro SPTSX and First Trust

Assuming the 90 days trading horizon BetaPro SPTSX 60 is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, BetaPro SPTSX 60 is 1.33 times less risky than First Trust. The etf trades about -0.06 of its potential returns per unit of risk. The First Trust SMID is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,143  in First Trust SMID on October 24, 2024 and sell it today you would earn a total of  183.00  from holding First Trust SMID or generate 8.54% return on investment over 90 days.

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

BetaPro SPTSX 60  vs.  First Trust SMID

BetaPro SPTSX 60

Risk-Adjusted Performance

0 of 100

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.

First Trust SMID

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust SMID are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BetaPro SPTSX and First Trust

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

The idea behind BetaPro SPTSX 60 and First Trust SMID 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.