Correlation Between Purpose Canadian and BetaPro SPTSX

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

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

Diversification Opportunities for Purpose Canadian and BetaPro SPTSX

0.99

Correlation Coefficient

Purpose Canadian  BetaPro SPTSX

No risk reduction

The 3 months correlation between Purpose and BetaPro is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Purpose Canadian Financial and BetaPro SPTSX Capped in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro SPTSX Capped and Purpose Canadian 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 Purpose Canadian Financial are associated (or correlated) with BetaPro SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro SPTSX Capped has no effect on the direction of Purpose Canadian i.e., Purpose Canadian and BetaPro SPTSX go up and down completely randomly.

Pair Corralation between Purpose Canadian and BetaPro SPTSX

Assuming the 90 days trading horizon Purpose Canadian is expected to generate 2.24 times less return on investment than BetaPro SPTSX. But when comparing it to its historical volatility, Purpose Canadian Financial is 2.21 times less risky than BetaPro SPTSX. It trades about 0.37 of its potential returns per unit of risk. BetaPro SPTSX Capped is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  2,516  in BetaPro SPTSX Capped on August 31, 2024 and sell it today you would earn a total of  739.00  from holding BetaPro SPTSX Capped or generate 29.37% return on investment over 90 days.

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

Purpose Canadian Financial  vs.  BetaPro SPTSX Capped

Purpose Canadian Fin

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Purpose Canadian Financial are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Purpose Canadian may actually be approaching a critical reversion point that can send shares even higher in December 2024.

BetaPro SPTSX Capped

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro SPTSX Capped are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BetaPro SPTSX displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Purpose Canadian and BetaPro SPTSX

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

The idea behind Purpose Canadian Financial and BetaPro SPTSX Capped 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.