Correlation Between Ultra Fund and Tsmxx

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

Diversification Opportunities for Ultra Fund and Tsmxx

-0.7

Correlation Coefficient

Ultra Fund  Tsmxx

Excellent diversification

The 3 months correlation between ULTRA and Tsmxx is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Fund R6 and Tsmxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsmxx 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 Tsmxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsmxx has no effect on the direction of Ultra Fund i.e., Ultra Fund and Tsmxx go up and down completely randomly.

Pair Corralation between Ultra Fund and Tsmxx

Assuming the 90 days horizon Ultra Fund R6 is expected to under-perform the Tsmxx. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ultra Fund R6 is 89.63 times less risky than Tsmxx. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Tsmxx is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  100.00  in Tsmxx on October 3, 2024 and sell it today you would earn a total of  0.00  from holding Tsmxx or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ultra Fund R6  vs.  Tsmxx

Ultra Fund R6

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Fund R6 are ranked lower than 8 (%) 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 February 2025.

Tsmxx

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tsmxx are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Tsmxx showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ultra Fund and Tsmxx

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

The idea behind Ultra Fund R6 and Tsmxx 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.