Correlation Between BetaShares Australia and BetaShares Diversified

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

By analyzing existing cross correlation between BetaShares Australia 200 and BetaShares Diversified High, you can compare the effects of market volatilities on BetaShares Australia and BetaShares Diversified 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 BetaShares Australia with a short position of BetaShares Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaShares Australia and BetaShares Diversified.

Diversification Opportunities for BetaShares Australia and BetaShares Diversified

0.88

Correlation Coefficient

BetaShares Australia  BetaShares Diversified

Very poor diversification

The 3 months correlation between BetaShares and BetaShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Australia 200 and BetaShares Diversified High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaShares Diversified and BetaShares Australia 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 BetaShares Australia 200 are associated (or correlated) with BetaShares Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaShares Diversified has no effect on the direction of BetaShares Australia i.e., BetaShares Australia and BetaShares Diversified go up and down completely randomly.

Pair Corralation between BetaShares Australia and BetaShares Diversified

Assuming the 90 days trading horizon BetaShares Australia is expected to generate 2.58 times less return on investment than BetaShares Diversified. In addition to that, BetaShares Australia is 1.08 times more volatile than BetaShares Diversified High. It trades about 0.09 of its total potential returns per unit of risk. BetaShares Diversified High is currently generating about 0.24 per unit of volatility. If you would invest  3,421  in BetaShares Diversified High on September 14, 2024 and sell it today you would earn a total of  273.00  from holding BetaShares Diversified High or generate 7.98% return on investment over 90 days.

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

BetaShares Australia 200  vs.  BetaShares Diversified High

BetaShares Australia 200

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Australia 200 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BetaShares Australia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

BetaShares Diversified

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Diversified High are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BetaShares Diversified may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BetaShares Australia and BetaShares Diversified

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

The idea behind BetaShares Australia 200 and BetaShares Diversified High 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.