Correlation Between BetaPro Natural and BetaPro Equal

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

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

Diversification Opportunities for BetaPro Natural and BetaPro Equal

-0.45

Correlation Coefficient

BetaPro Natural  BetaPro Equal

Very good diversification

The 3 months correlation between BetaPro and BetaPro is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro Natural Gas and BetaPro Equal Weight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro Equal Weight and BetaPro Natural 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 Natural Gas are associated (or correlated) with BetaPro Equal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro Equal Weight has no effect on the direction of BetaPro Natural i.e., BetaPro Natural and BetaPro Equal go up and down completely randomly.

Pair Corralation between BetaPro Natural and BetaPro Equal

Assuming the 90 days trading horizon BetaPro Natural is expected to generate 1.28 times less return on investment than BetaPro Equal. In addition to that, BetaPro Natural is 6.73 times more volatile than BetaPro Equal Weight. It trades about 0.03 of its total potential returns per unit of risk. BetaPro Equal Weight is currently generating about 0.26 per unit of volatility. If you would invest  2,560  in BetaPro Equal Weight on September 13, 2024 and sell it today you would earn a total of  450.00  from holding BetaPro Equal Weight or generate 17.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

BetaPro Natural Gas  vs.  BetaPro Equal Weight

BetaPro Natural Gas

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro Natural Gas are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BetaPro Natural displayed solid returns over the last few months and may actually be approaching a breakup point.

BetaPro Equal Weight

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro Equal Weight are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BetaPro Equal displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BetaPro Natural and BetaPro Equal

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

The idea behind BetaPro Natural Gas and BetaPro Equal Weight 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.