Correlation Between Ultra Fund and Disciplined Growth

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

Diversification Opportunities for Ultra Fund and Disciplined Growth

1.0

Correlation Coefficient

Ultra Fund  Disciplined Growth

No risk reduction

The 3 months correlation between Ultra and Disciplined is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Fund Investor and Disciplined Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Disciplined 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 Disciplined Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Disciplined Growth has no effect on the direction of Ultra Fund i.e., Ultra Fund and Disciplined Growth go up and down completely randomly.

Pair Corralation between Ultra Fund and Disciplined Growth

Assuming the 90 days horizon Ultra Fund is expected to generate 1.03 times less return on investment than Disciplined Growth. In addition to that, Ultra Fund is 1.02 times more volatile than Disciplined Growth Fund. It trades about 0.18 of its total potential returns per unit of risk. Disciplined Growth Fund is currently generating about 0.19 per unit of volatility. If you would invest  2,817  in Disciplined Growth Fund on September 2, 2024 and sell it today you would earn a total of  338.00  from holding Disciplined Growth Fund or generate 12.0% return on investment over 90 days.

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

Ultra Fund Investor  vs.  Disciplined Growth Fund

Ultra Fund Investor

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Fund Investor are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ultra Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Disciplined Growth

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Disciplined Growth Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Disciplined Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ultra Fund and Disciplined Growth

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

The idea behind Ultra Fund Investor and Disciplined Growth Fund 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.