Correlation Between BetaPro SP and BetaPro Inverse

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

By analyzing existing cross correlation between BetaPro SP TSX and BetaPro Inverse Bitcoin, you can compare the effects of market volatilities on BetaPro SP and BetaPro Inverse 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 BetaPro Inverse. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro SP and BetaPro Inverse.

Diversification Opportunities for BetaPro SP and BetaPro Inverse

-0.19

Correlation Coefficient

BetaPro SP  BetaPro Inverse

Good diversification

The 3 months correlation between BetaPro and BetaPro is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SP TSX and BetaPro Inverse Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro Inverse Bitcoin 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 TSX are associated (or correlated) with BetaPro Inverse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro Inverse Bitcoin has no effect on the direction of BetaPro SP i.e., BetaPro SP and BetaPro Inverse go up and down completely randomly.

Pair Corralation between BetaPro SP and BetaPro Inverse

Assuming the 90 days trading horizon BetaPro SP is expected to generate 4.92 times less return on investment than BetaPro Inverse. But when comparing it to its historical volatility, BetaPro SP TSX is 2.06 times less risky than BetaPro Inverse. It trades about 0.06 of its potential returns per unit of risk. BetaPro Inverse Bitcoin is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,140  in BetaPro Inverse Bitcoin on December 2, 2024 and sell it today you would earn a total of  312.00  from holding BetaPro Inverse Bitcoin or generate 14.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

BetaPro SP TSX  vs.  BetaPro Inverse Bitcoin

BetaPro SP TSX

Risk-Adjusted Performance

Very Weak

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

BetaPro Inverse Bitcoin

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro Inverse Bitcoin are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BetaPro Inverse displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BetaPro SP and BetaPro Inverse

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

The idea behind BetaPro SP TSX and BetaPro Inverse Bitcoin 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.