Correlation Between BetaPro SP and BetaPro Equal

Can any of the company-specific risk be diversified away by investing in both BetaPro SP 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 SP 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 SP 500 and BetaPro Equal Weight, you can compare the effects of market volatilities on BetaPro SP 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 SP with a short position of BetaPro Equal. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro SP and BetaPro Equal.

Diversification Opportunities for BetaPro SP and BetaPro Equal

-0.9

Correlation Coefficient

BetaPro SP  BetaPro Equal

Pay attention - limited upside

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 SP 500 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 SP 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 SP 500 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 SP i.e., BetaPro SP and BetaPro Equal go up and down completely randomly.

Pair Corralation between BetaPro SP and BetaPro Equal

Assuming the 90 days trading horizon BetaPro SP 500 is expected to under-perform the BetaPro Equal. In addition to that, BetaPro SP is 1.3 times more volatile than BetaPro Equal Weight. It trades about -0.19 of its total potential returns per unit of risk. BetaPro Equal Weight is currently generating about 0.31 per unit of volatility. If you would invest  2,353  in BetaPro Equal Weight on September 5, 2024 and sell it today you would earn a total of  560.00  from holding BetaPro Equal Weight or generate 23.8% return on investment over 90 days.

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

BetaPro SP 500  vs.  BetaPro Equal Weight

BetaPro SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BetaPro SP 500 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.

BetaPro Equal Weight

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro Equal Weight are ranked lower than 24 (%) 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 SP and BetaPro Equal

The main advantage of trading using opposite BetaPro SP and BetaPro Equal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaPro SP 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 SP 500 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.

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.