Correlation Between CI First and BetaPro Canadian

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

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

Diversification Opportunities for CI First and BetaPro Canadian

0.9

Correlation Coefficient

CI First  BetaPro Canadian

Almost no diversification

The 3 months correlation between MXF and BetaPro is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding CI First Asset 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 CI First 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 CI First Asset 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 CI First i.e., CI First and BetaPro Canadian go up and down completely randomly.

Pair Corralation between CI First and BetaPro Canadian

Assuming the 90 days trading horizon CI First is expected to generate 1.85 times less return on investment than BetaPro Canadian. But when comparing it to its historical volatility, CI First Asset is 2.2 times less risky than BetaPro Canadian. It trades about 0.07 of its potential returns per unit of risk. BetaPro Canadian Gold is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,094  in BetaPro Canadian Gold on September 4, 2024 and sell it today you would earn a total of  193.00  from holding BetaPro Canadian Gold or generate 9.22% return on investment over 90 days.

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

CI First Asset  vs.  BetaPro Canadian Gold

CI First Asset

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CI First Asset are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, CI First may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BetaPro Canadian Gold

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro Canadian Gold are ranked lower than 4 (%) 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 CI First and BetaPro Canadian

The main advantage of trading using opposite CI First and BetaPro Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CI First 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 CI First Asset 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.