Correlation Between Nebraska Municipal and Ultra Fund

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

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

Diversification Opportunities for Nebraska Municipal and Ultra Fund

0.26

Correlation Coefficient

Nebraska Municipal  Ultra Fund

Modest diversification

The 3 months correlation between Nebraska and Ultra is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nebraska Municipal Fund and Ultra Fund A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Fund A and Nebraska Municipal 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 Nebraska Municipal Fund are associated (or correlated) with Ultra Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Fund A has no effect on the direction of Nebraska Municipal i.e., Nebraska Municipal and Ultra Fund go up and down completely randomly.

Pair Corralation between Nebraska Municipal and Ultra Fund

Assuming the 90 days horizon Nebraska Municipal Fund is expected to under-perform the Ultra Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Nebraska Municipal Fund is 3.69 times less risky than Ultra Fund. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Ultra Fund A is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8,464  in Ultra Fund A on October 8, 2024 and sell it today you would earn a total of  343.00  from holding Ultra Fund A or generate 4.05% return on investment over 90 days.

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

Nebraska Municipal Fund  vs.  Ultra Fund A

Nebraska Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nebraska Municipal Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Nebraska Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ultra Fund A

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Fund A are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ultra Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nebraska Municipal and Ultra Fund

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

The idea behind Nebraska Municipal Fund and Ultra Fund A 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.