Correlation Between BetaPro NASDAQ and BetaPro SP

Can any of the company-specific risk be diversified away by investing in both BetaPro NASDAQ 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 NASDAQ 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 NASDAQ 100 2x and BetaPro SP TSX, you can compare the effects of market volatilities on BetaPro NASDAQ 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 NASDAQ with a short position of BetaPro SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro NASDAQ and BetaPro SP.

Diversification Opportunities for BetaPro NASDAQ and BetaPro SP

0.9

Correlation Coefficient

BetaPro NASDAQ  BetaPro SP

Almost no diversification

The 3 months correlation between BetaPro and BetaPro is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro NASDAQ 100 2x 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 NASDAQ 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 NASDAQ 100 2x 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 NASDAQ i.e., BetaPro NASDAQ and BetaPro SP go up and down completely randomly.

Pair Corralation between BetaPro NASDAQ and BetaPro SP

Assuming the 90 days trading horizon BetaPro NASDAQ is expected to generate 1.15 times less return on investment than BetaPro SP. In addition to that, BetaPro NASDAQ is 2.0 times more volatile than BetaPro SP TSX. It trades about 0.14 of its total potential returns per unit of risk. BetaPro SP TSX is currently generating about 0.32 per unit of volatility. If you would invest  2,384  in BetaPro SP TSX on August 31, 2024 and sell it today you would earn a total of  529.00  from holding BetaPro SP TSX or generate 22.19% return on investment over 90 days.

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

BetaPro NASDAQ 100 2x  vs.  BetaPro SP TSX

BetaPro NASDAQ 100

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro NASDAQ 100 2x are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BetaPro NASDAQ displayed solid returns over the last few months and may actually be approaching a breakup point.

BetaPro SP TSX

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro SP TSX are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BetaPro SP displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BetaPro NASDAQ and BetaPro SP

The main advantage of trading using opposite BetaPro NASDAQ and BetaPro SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaPro NASDAQ 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 NASDAQ 100 2x 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.