Correlation Between BetaPro SPTSX and IShares Diversified

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

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

Diversification Opportunities for BetaPro SPTSX and IShares Diversified

0.96

Correlation Coefficient

BetaPro SPTSX  IShares Diversified

Almost no diversification

The 3 months correlation between BetaPro and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SPTSX Capped and iShares Diversified Monthly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Diversified and BetaPro SPTSX 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 BetaPro SPTSX Capped are associated (or correlated) with IShares Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Diversified has no effect on the direction of BetaPro SPTSX i.e., BetaPro SPTSX and IShares Diversified go up and down completely randomly.

Pair Corralation between BetaPro SPTSX and IShares Diversified

Assuming the 90 days trading horizon BetaPro SPTSX Capped is expected to generate 4.27 times more return on investment than IShares Diversified. However, BetaPro SPTSX is 4.27 times more volatile than iShares Diversified Monthly. It trades about 0.27 of its potential returns per unit of risk. iShares Diversified Monthly is currently generating about 0.16 per unit of risk. If you would invest  2,728  in BetaPro SPTSX Capped on September 14, 2024 and sell it today you would earn a total of  524.00  from holding BetaPro SPTSX Capped or generate 19.21% return on investment over 90 days.

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

BetaPro SPTSX Capped  vs.  iShares Diversified Monthly

BetaPro SPTSX Capped

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro SPTSX Capped are ranked lower than 21 (%) 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.

iShares Diversified

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Diversified Monthly are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Diversified is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BetaPro SPTSX and IShares Diversified

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

The idea behind BetaPro SPTSX Capped and iShares Diversified Monthly 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.