Correlation Between BetaPro SP and BetaPro Crude

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

Diversification Opportunities for BetaPro SP and BetaPro Crude

0.33

Correlation Coefficient

BetaPro SP  BetaPro Crude

Weak diversification

The 3 months correlation between BetaPro and BetaPro is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SP 500 and BetaPro Crude Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro Crude Oil 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 Crude. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro Crude Oil has no effect on the direction of BetaPro SP i.e., BetaPro SP and BetaPro Crude go up and down completely randomly.

Pair Corralation between BetaPro SP and BetaPro Crude

Assuming the 90 days trading horizon BetaPro SP 500 is expected to under-perform the BetaPro Crude. But the etf apears to be less risky and, when comparing its historical volatility, BetaPro SP 500 is 3.14 times less risky than BetaPro Crude. The etf trades about -0.12 of its potential returns per unit of risk. The BetaPro Crude Oil is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,136  in BetaPro Crude Oil on September 15, 2024 and sell it today you would earn a total of  79.00  from holding BetaPro Crude Oil or generate 6.95% return on investment over 90 days.

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

BetaPro SP 500  vs.  BetaPro Crude Oil

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 latest unfluctuating performance, the Etf's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

BetaPro Crude Oil

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro Crude Oil are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BetaPro Crude may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BetaPro SP and BetaPro Crude

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

The idea behind BetaPro SP 500 and BetaPro Crude Oil 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 Global Correlations module to find global opportunities by holding instruments from different markets.