Correlation Between BetaPro SP and BetaPro Canadian

Can any of the company-specific risk be diversified away by investing in both BetaPro SP and BetaPro 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 SP and BetaPro Canadian 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 Canadian Gold, you can compare the effects of market volatilities on BetaPro SP and BetaPro 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 SP with a short position of BetaPro Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro SP and BetaPro Canadian.

Diversification Opportunities for BetaPro SP and BetaPro Canadian

0.15

Correlation Coefficient

BetaPro SP  BetaPro Canadian

Average diversification

The 3 months correlation between BetaPro and BetaPro is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SP TSX and BetaPro Canadian Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro Canadian Gold 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 Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro Canadian Gold has no effect on the direction of BetaPro SP i.e., BetaPro SP and BetaPro Canadian go up and down completely randomly.

Pair Corralation between BetaPro SP and BetaPro Canadian

Assuming the 90 days trading horizon BetaPro SP is expected to generate 12.12 times less return on investment than BetaPro Canadian. But when comparing it to its historical volatility, BetaPro SP TSX is 2.3 times less risky than BetaPro Canadian. It trades about 0.05 of its potential returns per unit of risk. BetaPro Canadian Gold is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,041  in BetaPro Canadian Gold on December 30, 2024 and sell it today you would earn a total of  1,543  from holding BetaPro Canadian Gold or generate 75.6% return on investment over 90 days.

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

BetaPro SP TSX  vs.  BetaPro Canadian Gold

BetaPro SP TSX

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro SP TSX are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 Canadian Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro Canadian Gold are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BetaPro Canadian displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BetaPro SP and BetaPro Canadian

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

The idea behind BetaPro SP TSX and BetaPro Canadian Gold 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.