Correlation Between Ultra Short and Advisors Capital

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

By analyzing existing cross correlation between Ultra Short Income and Advisors Capital Tactical, you can compare the effects of market volatilities on Ultra Short and Advisors Capital 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 Ultra Short with a short position of Advisors Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Short and Advisors Capital.

Diversification Opportunities for Ultra Short and Advisors Capital

0.6

Correlation Coefficient

Ultra Short  Advisors Capital

Poor diversification

The 3 months correlation between ULTRA and Advisors is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Short Income and Advisors Capital Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advisors Capital Tactical and Ultra Short 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 Ultra Short Income are associated (or correlated) with Advisors Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advisors Capital Tactical has no effect on the direction of Ultra Short i.e., Ultra Short and Advisors Capital go up and down completely randomly.

Pair Corralation between Ultra Short and Advisors Capital

Assuming the 90 days horizon Ultra Short Income is expected to generate 0.33 times more return on investment than Advisors Capital. However, Ultra Short Income is 2.99 times less risky than Advisors Capital. It trades about 0.19 of its potential returns per unit of risk. Advisors Capital Tactical is currently generating about 0.06 per unit of risk. If you would invest  988.00  in Ultra Short Income on December 29, 2024 and sell it today you would earn a total of  10.00  from holding Ultra Short Income or generate 1.01% return on investment over 90 days.

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

Ultra Short Income  vs.  Advisors Capital Tactical

Ultra Short Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Short Income are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ultra Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Advisors Capital Tactical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Advisors Capital Tactical are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Advisors Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ultra Short and Advisors Capital

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

The idea behind Ultra Short Income and Advisors Capital Tactical 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.