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 TSX 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
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BetaPro and BetaPro is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SP TSX 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 TSX 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 TSX is expected to generate 0.15 times more return on investment than BetaPro Natural. However, BetaPro SP TSX is 6.78 times less risky than BetaPro Natural. It trades about 0.29 of its potential returns per unit of risk. BetaPro Natural Gas is currently generating about 0.01 per unit of risk. If you would invest 2,675 in BetaPro SP TSX on August 25, 2024 and sell it today you would earn a total of 202.00 from holding BetaPro SP TSX or generate 7.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BetaPro SP TSX vs. BetaPro Natural Gas
Performance |
| Timeline |
| BetaPro SP TSX |
| 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.| BetaPro SP vs. BetaPro NASDAQ 100 2x | BetaPro SP vs. BetaPro Canadian Gold | BetaPro SP vs. BetaPro Crude Oil | BetaPro SP vs. BetaPro Natural Gas |
| BetaPro Natural vs. BetaPro Natural Gas | BetaPro Natural vs. BetaPro Crude Oil | BetaPro Natural vs. BetaPro Crude Oil | BetaPro Natural vs. BetaPro Canadian Gold |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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