Correlation Between Growth Strategy and Semiconductor Ultrasector

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

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

Diversification Opportunities for Growth Strategy and Semiconductor Ultrasector

0.29

Correlation Coefficient

Growth Strategy  Semiconductor Ultrasector

Modest diversification

The 3 months correlation between Growth and Semiconductor is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Growth Strategy Fund and Semiconductor Ultrasector Prof in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semiconductor Ultrasector and Growth Strategy 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 Growth Strategy Fund are associated (or correlated) with Semiconductor Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semiconductor Ultrasector has no effect on the direction of Growth Strategy i.e., Growth Strategy and Semiconductor Ultrasector go up and down completely randomly.

Pair Corralation between Growth Strategy and Semiconductor Ultrasector

Assuming the 90 days horizon Growth Strategy Fund is expected to generate 0.14 times more return on investment than Semiconductor Ultrasector. However, Growth Strategy Fund is 7.22 times less risky than Semiconductor Ultrasector. It trades about 0.0 of its potential returns per unit of risk. Semiconductor Ultrasector Profund is currently generating about -0.09 per unit of risk. If you would invest  1,264  in Growth Strategy Fund on December 25, 2024 and sell it today you would lose (1.00) from holding Growth Strategy Fund or give up 0.08% of portfolio value over 90 days.

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

Growth Strategy Fund  vs.  Semiconductor Ultrasector Prof

Growth Strategy

Risk-Adjusted Performance

Very Weak

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

Semiconductor Ultrasector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Semiconductor Ultrasector Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Growth Strategy and Semiconductor Ultrasector

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

The idea behind Growth Strategy Fund and Semiconductor 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.