Correlation Between Semiconductor Ultrasector and Global Core

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

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

Diversification Opportunities for Semiconductor Ultrasector and Global Core

0.4

Correlation Coefficient

Semiconductor Ultrasector  Global Core

Very weak diversification

The 3 months correlation between Semiconductor and Global is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Semiconductor Ultrasector Prof and Global E Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global E Portfolio and Semiconductor Ultrasector 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 Semiconductor Ultrasector Profund are associated (or correlated) with Global Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global E Portfolio has no effect on the direction of Semiconductor Ultrasector i.e., Semiconductor Ultrasector and Global Core go up and down completely randomly.

Pair Corralation between Semiconductor Ultrasector and Global Core

Assuming the 90 days horizon Semiconductor Ultrasector Profund is expected to under-perform the Global Core. In addition to that, Semiconductor Ultrasector is 4.7 times more volatile than Global E Portfolio. It trades about -0.1 of its total potential returns per unit of risk. Global E Portfolio is currently generating about -0.05 per unit of volatility. If you would invest  2,148  in Global E Portfolio on December 24, 2024 and sell it today you would lose (72.00) from holding Global E Portfolio or give up 3.35% of portfolio value over 90 days.

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

Semiconductor Ultrasector Prof  vs.  Global E Portfolio

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.

Global E Portfolio

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Semiconductor Ultrasector and Global Core

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

The idea behind Semiconductor Ultrasector Profund and Global E Portfolio 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.