Correlation Between Ultra Fund and Focused Dynamic

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

By analyzing existing cross correlation between Ultra Fund Investor and Focused Dynamic Growth, you can compare the effects of market volatilities on Ultra Fund and Focused Dynamic 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 Focused Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Fund and Focused Dynamic.

Diversification Opportunities for Ultra Fund and Focused Dynamic

0.95

Correlation Coefficient

Ultra Fund  Focused Dynamic

Almost no diversification

The 3 months correlation between Ultra and Focused is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Fund Investor and Focused Dynamic Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focused Dynamic Growth 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 Investor are associated (or correlated) with Focused Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focused Dynamic Growth has no effect on the direction of Ultra Fund i.e., Ultra Fund and Focused Dynamic go up and down completely randomly.

Pair Corralation between Ultra Fund and Focused Dynamic

Assuming the 90 days horizon Ultra Fund is expected to generate 1.43 times less return on investment than Focused Dynamic. But when comparing it to its historical volatility, Ultra Fund Investor is 1.21 times less risky than Focused Dynamic. It trades about 0.22 of its potential returns per unit of risk. Focused Dynamic Growth is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  6,089  in Focused Dynamic Growth on September 13, 2024 and sell it today you would earn a total of  1,252  from holding Focused Dynamic Growth or generate 20.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Ultra Fund Investor  vs.  Focused Dynamic Growth

Ultra Fund Investor

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Fund Investor are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ultra Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Focused Dynamic Growth

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Focused Dynamic Growth are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Focused Dynamic showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ultra Fund and Focused Dynamic

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

The idea behind Ultra Fund Investor and Focused Dynamic Growth 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.