Correlation Between BetaShares Australian and BetaShares Diversified

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

Diversification Opportunities for BetaShares Australian and BetaShares Diversified

-0.59

Correlation Coefficient

BetaShares Australian  BetaShares Diversified

Excellent diversification

The 3 months correlation between BetaShares and BetaShares is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Australian Investme 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 Australian 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 Australian Investment 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 Australian i.e., BetaShares Australian and BetaShares Diversified go up and down completely randomly.

Pair Corralation between BetaShares Australian and BetaShares Diversified

Assuming the 90 days trading horizon BetaShares Australian is expected to generate 18.78 times less return on investment than BetaShares Diversified. But when comparing it to its historical volatility, BetaShares Australian Investment is 1.8 times less risky than BetaShares Diversified. It trades about 0.03 of its potential returns per unit of risk. BetaShares Diversified High is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  3,357  in BetaShares Diversified High on September 5, 2024 and sell it today you would earn a total of  332.00  from holding BetaShares Diversified High or generate 9.89% return on investment over 90 days.

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

BetaShares Australian Investme  vs.  BetaShares Diversified High

BetaShares Australian

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Australian Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BetaShares Australian 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

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Diversified High are ranked lower than 22 (%) 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 Australian and BetaShares Diversified

The main advantage of trading using opposite BetaShares Australian and BetaShares Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaShares Australian 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 Australian Investment 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.