Correlation Between BetaShares Crude and ETFS Morningstar

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

By analyzing existing cross correlation between BetaShares Crude Oil and ETFS Morningstar Global, you can compare the effects of market volatilities on BetaShares Crude and ETFS Morningstar 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 BetaShares Crude with a short position of ETFS Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaShares Crude and ETFS Morningstar.

Diversification Opportunities for BetaShares Crude and ETFS Morningstar

-0.3

Correlation Coefficient

BetaShares Crude  ETFS Morningstar

Very good diversification

The 3 months correlation between BetaShares and ETFS is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Crude Oil and ETFS Morningstar Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Morningstar Global and BetaShares Crude 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 BetaShares Crude Oil are associated (or correlated) with ETFS Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Morningstar Global has no effect on the direction of BetaShares Crude i.e., BetaShares Crude and ETFS Morningstar go up and down completely randomly.

Pair Corralation between BetaShares Crude and ETFS Morningstar

Assuming the 90 days trading horizon BetaShares Crude is expected to generate 3.07 times less return on investment than ETFS Morningstar. In addition to that, BetaShares Crude is 1.43 times more volatile than ETFS Morningstar Global. It trades about 0.05 of its total potential returns per unit of risk. ETFS Morningstar Global is currently generating about 0.22 per unit of volatility. If you would invest  9,740  in ETFS Morningstar Global on September 14, 2024 and sell it today you would earn a total of  1,819  from holding ETFS Morningstar Global or generate 18.68% return on investment over 90 days.

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

BetaShares Crude Oil  vs.  ETFS Morningstar Global

BetaShares Crude Oil

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Crude Oil are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BetaShares Crude is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

ETFS Morningstar Global

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS Morningstar Global are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ETFS Morningstar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BetaShares Crude and ETFS Morningstar

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

The idea behind BetaShares Crude Oil and ETFS Morningstar Global 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..