Correlation Between BetaPro Natural and BetaPro Crude
Can any of the company-specific risk be diversified away by investing in both BetaPro Natural 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 Natural 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 Natural Gas and BetaPro Crude Oil, you can compare the effects of market volatilities on BetaPro Natural 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 Natural with a short position of BetaPro Crude. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro Natural and BetaPro Crude.
Diversification Opportunities for BetaPro Natural and BetaPro Crude
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between BetaPro and BetaPro is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro Natural Gas 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 Natural 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 Natural Gas 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 Natural i.e., BetaPro Natural and BetaPro Crude go up and down completely randomly.
Pair Corralation between BetaPro Natural and BetaPro Crude
Assuming the 90 days trading horizon BetaPro Natural Gas is expected to under-perform the BetaPro Crude. In addition to that, BetaPro Natural is 1.43 times more volatile than BetaPro Crude Oil. It trades about -0.04 of its total potential returns per unit of risk. BetaPro Crude Oil is currently generating about 0.02 per unit of volatility. If you would invest 1,136 in BetaPro Crude Oil on August 28, 2024 and sell it today you would earn a total of 2.00 from holding BetaPro Crude Oil or generate 0.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BetaPro Natural Gas vs. BetaPro Crude Oil
Performance |
| Timeline |
| BetaPro Natural Gas |
| BetaPro Crude Oil |
BetaPro Natural and BetaPro Crude Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BetaPro Natural and BetaPro Crude
The main advantage of trading using opposite BetaPro Natural and BetaPro Crude positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaPro Natural 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 Natural Gas 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.| BetaPro Crude vs. BetaPro Gold Bullion | BetaPro Crude vs. BetaPro NASDAQ 100 2x | BetaPro Crude vs. BetaPro SP TSX | BetaPro Crude vs. BetaPro SP TSX |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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