Correlation Between Ultra Fund and Multi Asset

Can any of the company-specific risk be diversified away by investing in both Ultra Fund and Multi Asset 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 Multi Asset 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 Multi Asset Real Return, you can compare the effects of market volatilities on Ultra Fund and Multi Asset 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 Multi Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Fund and Multi Asset.

Diversification Opportunities for Ultra Fund and Multi Asset

0.86

Correlation Coefficient

Ultra Fund  Multi Asset

Very poor diversification

The 3 months correlation between Ultra and Multi is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Fund C and Multi Asset Real Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Asset Real 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 Multi Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Asset Real has no effect on the direction of Ultra Fund i.e., Ultra Fund and Multi Asset go up and down completely randomly.

Pair Corralation between Ultra Fund and Multi Asset

Assuming the 90 days horizon Ultra Fund C is expected to generate 1.21 times more return on investment than Multi Asset. However, Ultra Fund is 1.21 times more volatile than Multi Asset Real Return. It trades about -0.07 of its potential returns per unit of risk. Multi Asset Real Return is currently generating about -0.16 per unit of risk. If you would invest  6,517  in Ultra Fund C on September 23, 2024 and sell it today you would lose (157.00) from holding Ultra Fund C or give up 2.41% of portfolio value over 90 days.

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

Ultra Fund C  vs.  Multi Asset Real Return

Ultra Fund C

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Fund C are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Ultra Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Multi Asset Real

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Asset Real Return are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multi Asset 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 Multi Asset

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

The idea behind Ultra Fund C and Multi Asset Real Return 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.