Correlation Between Ultimus Managers and IShares Biotechnology

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

By analyzing existing cross correlation between Ultimus Managers Trust and iShares Biotechnology ETF, you can compare the effects of market volatilities on Ultimus Managers and IShares Biotechnology 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 Ultimus Managers with a short position of IShares Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultimus Managers and IShares Biotechnology.

Diversification Opportunities for Ultimus Managers and IShares Biotechnology

-0.39

Correlation Coefficient

Ultimus Managers  IShares Biotechnology

Very good diversification

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

Pair Corralation between Ultimus Managers and IShares Biotechnology

Given the investment horizon of 90 days Ultimus Managers Trust is expected to generate 0.77 times more return on investment than IShares Biotechnology. However, Ultimus Managers Trust is 1.3 times less risky than IShares Biotechnology. It trades about 0.19 of its potential returns per unit of risk. iShares Biotechnology ETF is currently generating about -0.04 per unit of risk. If you would invest  2,573  in Ultimus Managers Trust on October 24, 2024 and sell it today you would earn a total of  308.00  from holding Ultimus Managers Trust or generate 11.97% return on investment over 90 days.

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

Ultimus Managers Trust  vs.  iShares Biotechnology ETF

Ultimus Managers Trust

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ultimus Managers Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Ultimus Managers may actually be approaching a critical reversion point that can send shares even higher in February 2025.

iShares Biotechnology ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Biotechnology ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, IShares Biotechnology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ultimus Managers and IShares Biotechnology

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

The idea behind Ultimus Managers Trust and iShares Biotechnology ETF 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.