Correlation Between Johcm Global and Financials Ultrasector

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

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

Diversification Opportunities for Johcm Global and Financials Ultrasector

0.59

Correlation Coefficient

Johcm Global  Financials Ultrasector

Very weak diversification

The 3 months correlation between Johcm and Financials is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Johcm Global Equity and Financials Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financials Ultrasector and Johcm Global 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 Johcm Global Equity are associated (or correlated) with Financials Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financials Ultrasector has no effect on the direction of Johcm Global i.e., Johcm Global and Financials Ultrasector go up and down completely randomly.

Pair Corralation between Johcm Global and Financials Ultrasector

Assuming the 90 days horizon Johcm Global Equity is expected to under-perform the Financials Ultrasector. In addition to that, Johcm Global is 1.05 times more volatile than Financials Ultrasector Profund. It trades about -0.08 of its total potential returns per unit of risk. Financials Ultrasector Profund is currently generating about 0.03 per unit of volatility. If you would invest  4,144  in Financials Ultrasector Profund on December 30, 2024 and sell it today you would earn a total of  92.00  from holding Financials Ultrasector Profund or generate 2.22% return on investment over 90 days.

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

Johcm Global Equity  vs.  Financials Ultrasector Profund

Johcm Global Equity

Risk-Adjusted Performance

Very Weak

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

Financials Ultrasector

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Financials Ultrasector Profund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Financials Ultrasector is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Johcm Global and Financials Ultrasector

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

The idea behind Johcm Global Equity and Financials Ultrasector Profund 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.