Correlation Between Vanguard and BetaPro SPTSX

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

By analyzing existing cross correlation between Vanguard SP 500 and BetaPro SPTSX 60, you can compare the effects of market volatilities on Vanguard and BetaPro SPTSX 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 Vanguard with a short position of BetaPro SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and BetaPro SPTSX.

Diversification Opportunities for Vanguard and BetaPro SPTSX

-0.97

Correlation Coefficient

Vanguard  BetaPro SPTSX

Pay attention - limited upside

The 3 months correlation between Vanguard and BetaPro is -0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and BetaPro SPTSX 60 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro SPTSX 60 and Vanguard 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 Vanguard SP 500 are associated (or correlated) with BetaPro SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro SPTSX 60 has no effect on the direction of Vanguard i.e., Vanguard and BetaPro SPTSX go up and down completely randomly.

Pair Corralation between Vanguard and BetaPro SPTSX

Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 0.74 times more return on investment than BetaPro SPTSX. However, Vanguard SP 500 is 1.35 times less risky than BetaPro SPTSX. It trades about 0.28 of its potential returns per unit of risk. BetaPro SPTSX 60 is currently generating about -0.26 per unit of risk. If you would invest  13,465  in Vanguard SP 500 on September 12, 2024 and sell it today you would earn a total of  1,736  from holding Vanguard SP 500 or generate 12.89% return on investment over 90 days.

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

Vanguard SP 500  vs.  BetaPro SPTSX 60

Vanguard SP 500

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BetaPro SPTSX 60

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BetaPro SPTSX 60 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.

Pair Trading with Vanguard and BetaPro SPTSX

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

The idea behind Vanguard SP 500 and BetaPro SPTSX 60 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.