Correlation Between Ultrasmall Cap and Ultrabear Profund

Can any of the company-specific risk be diversified away by investing in both Ultrasmall Cap and Ultrabear Profund 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 Ultrasmall Cap and Ultrabear Profund into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Ultrasmall Cap and Ultrabear Profund

-0.92

Correlation Coefficient

Ultrasmall Cap  Ultrabear Profund

Pay attention - limited upside

The 3 months correlation between Ultrasmall and Ultrabear is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Ultrasmall Cap Profund Ultrasm and Ultrabear Profund Ultrabear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrabear Profund and Ultrasmall Cap 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 Ultrasmall Cap Profund Ultrasmall Cap are associated (or correlated) with Ultrabear Profund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrabear Profund has no effect on the direction of Ultrasmall Cap i.e., Ultrasmall Cap and Ultrabear Profund go up and down completely randomly.

Pair Corralation between Ultrasmall Cap and Ultrabear Profund

Assuming the 90 days horizon Ultrasmall Cap Profund Ultrasmall Cap is expected to generate 1.86 times more return on investment than Ultrabear Profund. However, Ultrasmall Cap is 1.86 times more volatile than Ultrabear Profund Ultrabear. It trades about 0.11 of its potential returns per unit of risk. Ultrabear Profund Ultrabear is currently generating about -0.14 per unit of risk. If you would invest  5,269  in Ultrasmall Cap Profund Ultrasmall Cap on September 14, 2024 and sell it today you would earn a total of  888.00  from holding Ultrasmall Cap Profund Ultrasmall Cap or generate 16.85% return on investment over 90 days.

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

Ultrasmall Cap Profund Ultrasm  vs.  Ultrabear Profund Ultrabear

Ultrasmall Cap Profund

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrasmall Cap Profund Ultrasmall Cap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ultrasmall Cap showed solid returns over the last few months and may actually be approaching a breakup point.

Ultrabear Profund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultrabear Profund Ultrabear has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Ultrasmall Cap and Ultrabear Profund

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

The idea behind Ultrasmall Cap Profund Ultrasmall Cap and Ultrabear Profund Ultrabear 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.