Correlation Between BetaPro SP and BetaPro Natural
Can any of the company-specific risk be diversified away by investing in both BetaPro SP and BetaPro Natural 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 Natural 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 Natural Gas, you can compare the effects of market volatilities on BetaPro SP and BetaPro Natural 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 Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro SP and BetaPro Natural.
Diversification Opportunities for BetaPro SP and BetaPro Natural
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BetaPro and BetaPro is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SP 500 and BetaPro Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro Natural Gas 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 Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro Natural Gas has no effect on the direction of BetaPro SP i.e., BetaPro SP and BetaPro Natural go up and down completely randomly.
Pair Corralation between BetaPro SP and BetaPro Natural
Assuming the 90 days trading horizon BetaPro SP 500 is expected to under-perform the BetaPro Natural. But the etf apears to be less risky and, when comparing its historical volatility, BetaPro SP 500 is 4.15 times less risky than BetaPro Natural. The etf trades about -0.16 of its potential returns per unit of risk. The BetaPro Natural Gas is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 226.00 in BetaPro Natural Gas on August 28, 2024 and sell it today you would earn a total of 54.00 from holding BetaPro Natural Gas or generate 23.89% 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 Natural Gas
Performance |
| Timeline |
| BetaPro SP 500 |
| BetaPro Natural Gas |
BetaPro SP and BetaPro Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BetaPro SP and BetaPro Natural
The main advantage of trading using opposite BetaPro SP and BetaPro Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaPro SP position performs unexpectedly, BetaPro Natural 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 Natural will offset losses from the drop in BetaPro Natural's long position.The idea behind BetaPro SP 500 and BetaPro Natural Gas 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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