Correlation Between Aggressive Investors and Ultra Small

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

By analyzing existing cross correlation between Aggressive Investors 1 and Ultra Small Pany Fund, you can compare the effects of market volatilities on Aggressive Investors and Ultra Small 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 Aggressive Investors with a short position of Ultra Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aggressive Investors and Ultra Small.

Diversification Opportunities for Aggressive Investors and Ultra Small

0.93

Correlation Coefficient

Aggressive Investors  Ultra Small

Almost no diversification

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

Pair Corralation between Aggressive Investors and Ultra Small

Assuming the 90 days horizon Aggressive Investors 1 is expected to generate 0.67 times more return on investment than Ultra Small. However, Aggressive Investors 1 is 1.48 times less risky than Ultra Small. It trades about 0.36 of its potential returns per unit of risk. Ultra Small Pany Fund is currently generating about 0.2 per unit of risk. If you would invest  8,607  in Aggressive Investors 1 on September 2, 2024 and sell it today you would earn a total of  1,877  from holding Aggressive Investors 1 or generate 21.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Aggressive Investors 1  vs.  Ultra Small Pany Fund

Aggressive Investors

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Aggressive Investors 1 are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Aggressive Investors showed solid returns over the last few months and may actually be approaching a breakup point.

Ultra Small Pany

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Small Pany Fund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ultra Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aggressive Investors and Ultra Small

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

The idea behind Aggressive Investors 1 and Ultra Small Pany 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.