Correlation Between ETFS Ultra and ETFS SP

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

By analyzing existing cross correlation between ETFS Ultra Long and ETFS SP Biotech, you can compare the effects of market volatilities on ETFS Ultra and ETFS SP 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 ETFS Ultra with a short position of ETFS SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETFS Ultra and ETFS SP.

Diversification Opportunities for ETFS Ultra and ETFS SP

0.39

Correlation Coefficient

ETFS Ultra  ETFS SP

Weak diversification

The 3 months correlation between ETFS and ETFS is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Ultra Long and ETFS SP Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS SP Biotech and ETFS Ultra 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 ETFS Ultra Long are associated (or correlated) with ETFS SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS SP Biotech has no effect on the direction of ETFS Ultra i.e., ETFS Ultra and ETFS SP go up and down completely randomly.

Pair Corralation between ETFS Ultra and ETFS SP

Assuming the 90 days trading horizon ETFS Ultra Long is expected to generate 1.4 times more return on investment than ETFS SP. However, ETFS Ultra is 1.4 times more volatile than ETFS SP Biotech. It trades about 0.16 of its potential returns per unit of risk. ETFS SP Biotech is currently generating about 0.06 per unit of risk. If you would invest  861.00  in ETFS Ultra Long on September 4, 2024 and sell it today you would earn a total of  198.00  from holding ETFS Ultra Long or generate 23.0% return on investment over 90 days.

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

ETFS Ultra Long  vs.  ETFS SP Biotech

ETFS Ultra Long

Risk-Adjusted Performance

12 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS Ultra Long are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ETFS Ultra unveiled solid returns over the last few months and may actually be approaching a breakup point.

ETFS SP Biotech

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS SP Biotech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ETFS SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ETFS Ultra and ETFS SP

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

The idea behind ETFS Ultra Long and ETFS SP Biotech 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.