Correlation Between Internet Ultrasector and Western Asset

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

By analyzing existing cross correlation between Internet Ultrasector Profund and Western Asset Smash, you can compare the effects of market volatilities on Internet Ultrasector and Western Asset 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 Internet Ultrasector with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Internet Ultrasector and Western Asset.

Diversification Opportunities for Internet Ultrasector and Western Asset

-0.48

Correlation Coefficient

Internet Ultrasector  Western Asset

Very good diversification

The 3 months correlation between Internet and Western is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Internet Ultrasector Profund and Western Asset Smash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Smash and Internet Ultrasector 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 Internet Ultrasector Profund are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Smash has no effect on the direction of Internet Ultrasector i.e., Internet Ultrasector and Western Asset go up and down completely randomly.

Pair Corralation between Internet Ultrasector and Western Asset

Assuming the 90 days horizon Internet Ultrasector Profund is expected to generate 2.91 times more return on investment than Western Asset. However, Internet Ultrasector is 2.91 times more volatile than Western Asset Smash. It trades about -0.05 of its potential returns per unit of risk. Western Asset Smash is currently generating about -0.61 per unit of risk. If you would invest  3,758  in Internet Ultrasector Profund on October 9, 2024 and sell it today you would lose (81.00) from holding Internet Ultrasector Profund or give up 2.16% of portfolio value over 90 days.

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

Internet Ultrasector Profund  vs.  Western Asset Smash

Internet Ultrasector

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Internet Ultrasector Profund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Internet Ultrasector showed solid returns over the last few months and may actually be approaching a breakup point.

Western Asset Smash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Smash has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Internet Ultrasector and Western Asset

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

The idea behind Internet Ultrasector Profund and Western Asset Smash 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.