Correlation Between BetaPro SP and First Asset

Can any of the company-specific risk be diversified away by investing in both BetaPro SP and First Asset 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 First Asset 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 First Asset Morningstar, you can compare the effects of market volatilities on BetaPro SP and First Asset 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 First Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro SP and First Asset.

Diversification Opportunities for BetaPro SP and First Asset

0.98

Correlation Coefficient

BetaPro SP  First Asset

Almost no diversification

The 3 months correlation between BetaPro and First is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SP TSX and First Asset Morningstar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Asset Morningstar 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 First Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Asset Morningstar has no effect on the direction of BetaPro SP i.e., BetaPro SP and First Asset go up and down completely randomly.

Pair Corralation between BetaPro SP and First Asset

Assuming the 90 days trading horizon BetaPro SP TSX is expected to generate 1.8 times more return on investment than First Asset. However, BetaPro SP is 1.8 times more volatile than First Asset Morningstar. It trades about 0.41 of its potential returns per unit of risk. First Asset Morningstar is currently generating about 0.44 per unit of risk. If you would invest  2,609  in BetaPro SP TSX on April 22, 2025 and sell it today you would earn a total of  642.00  from holding BetaPro SP TSX or generate 24.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

BetaPro SP TSX  vs.  First Asset Morningstar

BetaPro SP TSX

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro SP TSX are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BetaPro SP displayed solid returns over the last few months and may actually be approaching a breakup point.

First Asset Morningstar

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in First Asset Morningstar are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, First Asset displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BetaPro SP and First Asset

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

The idea behind BetaPro SP TSX and First Asset Morningstar 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.