Correlation Between BetaPro Canadian and BetaPro SP

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

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

Diversification Opportunities for BetaPro Canadian and BetaPro SP

-0.27

Correlation Coefficient

BetaPro Canadian  BetaPro SP

Very good diversification

The 3 months correlation between BetaPro and BetaPro is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro Canadian Gold and BetaPro SP TSX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro SP TSX and BetaPro 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 BetaPro Canadian Gold are associated (or correlated) with BetaPro SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro SP TSX has no effect on the direction of BetaPro Canadian i.e., BetaPro Canadian and BetaPro SP go up and down completely randomly.

Pair Corralation between BetaPro Canadian and BetaPro SP

Assuming the 90 days trading horizon BetaPro Canadian Gold is expected to generate 113.88 times more return on investment than BetaPro SP. However, BetaPro Canadian is 113.88 times more volatile than BetaPro SP TSX. It trades about 0.12 of its potential returns per unit of risk. BetaPro SP TSX is currently generating about -0.37 per unit of risk. If you would invest  277.00  in BetaPro Canadian Gold on September 3, 2024 and sell it today you would earn a total of  2,476  from holding BetaPro Canadian Gold or generate 893.86% return on investment over 90 days.

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

BetaPro Canadian Gold  vs.  BetaPro SP TSX

BetaPro Canadian Gold

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro Canadian Gold are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, BetaPro Canadian displayed solid returns over the last few months and may actually be approaching a breakup point.

BetaPro SP TSX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BetaPro SP TSX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with BetaPro Canadian and BetaPro SP

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

The idea behind BetaPro Canadian Gold and BetaPro SP TSX 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 Global Correlations module to find global opportunities by holding instruments from different markets.