Correlation Between Ultra Fund and Cargile Fund

Can any of the company-specific risk be diversified away by investing in both Ultra Fund and Cargile Fund 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 Ultra Fund and Cargile Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ultra Fund R6 and Cargile Fund, you can compare the effects of market volatilities on Ultra Fund and Cargile Fund 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 Ultra Fund with a short position of Cargile Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Fund and Cargile Fund.

Diversification Opportunities for Ultra Fund and Cargile Fund

0.93

Correlation Coefficient

Ultra Fund  Cargile Fund

Almost no diversification

The 3 months correlation between Ultra and Cargile is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Fund R6 and Cargile Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cargile Fund and Ultra Fund 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 Ultra Fund R6 are associated (or correlated) with Cargile Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cargile Fund has no effect on the direction of Ultra Fund i.e., Ultra Fund and Cargile Fund go up and down completely randomly.

Pair Corralation between Ultra Fund and Cargile Fund

Assuming the 90 days horizon Ultra Fund R6 is expected to generate 1.87 times more return on investment than Cargile Fund. However, Ultra Fund is 1.87 times more volatile than Cargile Fund. It trades about 0.13 of its potential returns per unit of risk. Cargile Fund is currently generating about 0.02 per unit of risk. If you would invest  5,333  in Ultra Fund R6 on September 22, 2024 and sell it today you would earn a total of  4,899  from holding Ultra Fund R6 or generate 91.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Ultra Fund R6  vs.  Cargile Fund

Ultra Fund R6

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Fund R6 are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Ultra Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cargile Fund

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cargile Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Cargile Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ultra Fund and Cargile Fund

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

The idea behind Ultra Fund R6 and Cargile Fund 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.