Correlation Between American Funds and Ultra Fund

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

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

Diversification Opportunities for American Funds and Ultra Fund

0.97

Correlation Coefficient

American Funds  Ultra Fund

Almost no diversification

The 3 months correlation between American and Ultra is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding American Funds The and Ultra Fund R6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Fund R6 and American Funds 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 American Funds The are associated (or correlated) with Ultra Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Fund R6 has no effect on the direction of American Funds i.e., American Funds and Ultra Fund go up and down completely randomly.

Pair Corralation between American Funds and Ultra Fund

Assuming the 90 days horizon American Funds The is expected to generate about the same return on investment as Ultra Fund R6. However, American Funds is 1.06 times more volatile than Ultra Fund R6. It trades about 0.11 of its potential returns per unit of risk. Ultra Fund R6 is currently producing about 0.12 per unit of risk. If you would invest  7,148  in Ultra Fund R6 on September 12, 2024 and sell it today you would earn a total of  3,537  from holding Ultra Fund R6 or generate 49.48% return on investment over 90 days.

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

American Funds The  vs.  Ultra Fund R6

American Funds

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds The are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, American Funds may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ultra Fund R6

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Fund R6 are ranked lower than 15 (%) 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.

Pair Trading with American Funds and Ultra Fund

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

The idea behind American Funds The and Ultra Fund R6 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.