Correlation Between Technology Ultrasector and Inverse Sp

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

By analyzing existing cross correlation between Technology Ultrasector Profund and Inverse Sp 500, you can compare the effects of market volatilities on Technology Ultrasector and Inverse Sp 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 Technology Ultrasector with a short position of Inverse Sp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Ultrasector and Inverse Sp.

Diversification Opportunities for Technology Ultrasector and Inverse Sp

-0.85

Correlation Coefficient

Technology Ultrasector  Inverse Sp

Pay attention - limited upside

The 3 months correlation between Technology and Inverse is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Technology Ultrasector Profund and Inverse Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Sp 500 and Technology 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 Technology Ultrasector Profund are associated (or correlated) with Inverse Sp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Sp 500 has no effect on the direction of Technology Ultrasector i.e., Technology Ultrasector and Inverse Sp go up and down completely randomly.

Pair Corralation between Technology Ultrasector and Inverse Sp

Assuming the 90 days horizon Technology Ultrasector Profund is expected to generate 1.2 times more return on investment than Inverse Sp. However, Technology Ultrasector is 1.2 times more volatile than Inverse Sp 500. It trades about 0.11 of its potential returns per unit of risk. Inverse Sp 500 is currently generating about -0.1 per unit of risk. If you would invest  1,662  in Technology Ultrasector Profund on September 27, 2024 and sell it today you would earn a total of  2,575  from holding Technology Ultrasector Profund or generate 154.93% return on investment over 90 days.

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

Technology Ultrasector Profund  vs.  Inverse Sp 500

Technology Ultrasector

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Ultrasector Profund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Technology Ultrasector may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Inverse Sp 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inverse Sp 500 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 fundamental drivers remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Technology Ultrasector and Inverse Sp

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

The idea behind Technology Ultrasector Profund and Inverse Sp 500 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.