Correlation Between Ultra Fund and Global Small

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

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

Diversification Opportunities for Ultra Fund and Global Small

0.79

Correlation Coefficient

Ultra Fund  Global Small

Poor diversification

The 3 months correlation between Ultra and Global is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Fund C and Global Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Small Cap and Ultra Fund 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 Ultra Fund C are associated (or correlated) with Global Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Small Cap has no effect on the direction of Ultra Fund i.e., Ultra Fund and Global Small go up and down completely randomly.

Pair Corralation between Ultra Fund and Global Small

Assuming the 90 days horizon Ultra Fund C is expected to under-perform the Global Small. In addition to that, Ultra Fund is 1.19 times more volatile than Global Small Cap. It trades about -0.14 of its total potential returns per unit of risk. Global Small Cap is currently generating about -0.06 per unit of volatility. If you would invest  1,854  in Global Small Cap on December 29, 2024 and sell it today you would lose (92.00) from holding Global Small Cap or give up 4.96% of portfolio value over 90 days.

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

Ultra Fund C  vs.  Global Small Cap

Ultra Fund C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultra Fund C 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 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 Small Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Ultra Fund and Global Small

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

The idea behind Ultra Fund C and Global Small Cap 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 Anywhere module to track or share privately all of your investments from the convenience of any device.