Correlation Between ETFS Morningstar and BetaShares Geared

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

By analyzing existing cross correlation between ETFS Morningstar Global and BetaShares Geared Equity, you can compare the effects of market volatilities on ETFS Morningstar and BetaShares Geared 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 ETFS Morningstar with a short position of BetaShares Geared. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETFS Morningstar and BetaShares Geared.

Diversification Opportunities for ETFS Morningstar and BetaShares Geared

0.89

Correlation Coefficient

ETFS Morningstar  BetaShares Geared

Very poor diversification

The 3 months correlation between ETFS and BetaShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Morningstar Global and BetaShares Geared Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaShares Geared Equity and ETFS Morningstar 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 ETFS Morningstar Global are associated (or correlated) with BetaShares Geared. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaShares Geared Equity has no effect on the direction of ETFS Morningstar i.e., ETFS Morningstar and BetaShares Geared go up and down completely randomly.

Pair Corralation between ETFS Morningstar and BetaShares Geared

Assuming the 90 days trading horizon ETFS Morningstar is expected to generate 1.13 times less return on investment than BetaShares Geared. But when comparing it to its historical volatility, ETFS Morningstar Global is 1.32 times less risky than BetaShares Geared. It trades about 0.14 of its potential returns per unit of risk. BetaShares Geared Equity is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,114  in BetaShares Geared Equity on September 3, 2024 and sell it today you would earn a total of  537.00  from holding BetaShares Geared Equity or generate 13.05% return on investment over 90 days.

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

ETFS Morningstar Global  vs.  BetaShares Geared Equity

ETFS Morningstar Global

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS Morningstar Global are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ETFS Morningstar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BetaShares Geared Equity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Geared Equity are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BetaShares Geared unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ETFS Morningstar and BetaShares Geared

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

The idea behind ETFS Morningstar Global and BetaShares Geared Equity 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.