Can someone help with this seemingly simple question? According to UBS, delta-adjusted indicates the market risk. So if your delta-adjusted exposure is 80%, then when market increases by 1%. The fund increases by 0.8% http://www.ubs.com/1/e/globalam/glossary/d.html At the same time, according to Orbis (I just googled…). Beta-adjusted exposure shows your market risk exposure. Am I reading it correctly that it also means the fund icnreases by 0.8% when market increase by 1% when your beta-adjusted exposure is 80%. https://www.orbisfunds.com/Reports/Orbis%20Absolute%20Quarterly%20Reports%201999Q2.pdf
To have a greater than 100% delta exposure, you’ll need to borrow funds to do it. (or synthetically if doing it through options) To have a greater than 1 beta, you don’t necessarily need to borrow, you just need to own companies with significant operating leverage. Delta signifies % of long exposure you have in a portfolio, whereas beta is correlation to the market.
Beta is not just correlation, though that’s a part of it. It’s a measure of an asset’s covariance to a market and market volatility. Beta is covar(asset, market) / variance(market). This can also be written correlation(asset, market) * stdev(asset) / stdev(market). Delta is a measure of long-short exposure, usually to the underlying security on which an option is based. This is only similar when you’re trading options on the market, but not similar when trading options on, say, XTO. If you had a 0.8 delta to XTO, you’d have made ~12% today, whereas a 0.8 beta would have netted you ~0.56% if you define the “market” as the S&P 500.
I’m not sure I understand the question. Delta is an option measure that tells you your exposure to changes in the underlying. Beta is a (usually) stock measure that tells you your exposure to market movements (though technically, beta can be used for other assets as well). Your market exposure when holding an option would thus be something like beta*delta. A 1% move in the market index creates a Beta*1% move in the underlying which creates a Delta*(Beta*1%) move in your option price. But options have time decay plus volatility measures, so I’m not sure whether it really makes a lot of sense to use beta for options, since the bigger risk is often unexpected changes in volatility.