Correlation Between Small-cap Growth and Ultrabear Profund

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

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

Diversification Opportunities for Small-cap Growth and Ultrabear Profund

-0.61

Correlation Coefficient

Small-cap Growth  Ultrabear Profund

Excellent diversification

The 3 months correlation between Small-cap and Ultrabear is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth Profund and Ultrabear Profund Ultrabear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrabear Profund and Small-cap Growth 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 Small Cap Growth Profund are associated (or correlated) with Ultrabear Profund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrabear Profund has no effect on the direction of Small-cap Growth i.e., Small-cap Growth and Ultrabear Profund go up and down completely randomly.

Pair Corralation between Small-cap Growth and Ultrabear Profund

Assuming the 90 days horizon Small Cap Growth Profund is expected to under-perform the Ultrabear Profund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Small Cap Growth Profund is 1.49 times less risky than Ultrabear Profund. The mutual fund trades about -0.31 of its potential returns per unit of risk. The Ultrabear Profund Ultrabear is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  855.00  in Ultrabear Profund Ultrabear on December 4, 2024 and sell it today you would earn a total of  44.00  from holding Ultrabear Profund Ultrabear or generate 5.15% return on investment over 90 days.

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

Small Cap Growth Profund  vs.  Ultrabear Profund Ultrabear

Small Cap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Growth 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.

Ultrabear Profund

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrabear Profund Ultrabear are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ultrabear Profund may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Small-cap Growth and Ultrabear Profund

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

The idea behind Small Cap Growth Profund and Ultrabear Profund Ultrabear 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.