Correlation Between Ultralatin America and Large Cap

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

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

Diversification Opportunities for Ultralatin America and Large Cap

-0.76

Correlation Coefficient

Ultralatin America  Large Cap

Pay attention - limited upside

The 3 months correlation between Ultralatin and Large is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ultralatin America Profund and Large Cap Growth Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Growth and Ultralatin America 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 Ultralatin America Profund are associated (or correlated) with Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Growth has no effect on the direction of Ultralatin America i.e., Ultralatin America and Large Cap go up and down completely randomly.

Pair Corralation between Ultralatin America and Large Cap

Assuming the 90 days horizon Ultralatin America Profund is expected to under-perform the Large Cap. In addition to that, Ultralatin America is 2.45 times more volatile than Large Cap Growth Profund. It trades about -0.01 of its total potential returns per unit of risk. Large Cap Growth Profund is currently generating about 0.1 per unit of volatility. If you would invest  2,926  in Large Cap Growth Profund on October 6, 2024 and sell it today you would earn a total of  1,626  from holding Large Cap Growth Profund or generate 55.57% return on investment over 90 days.

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

Ultralatin America Profund  vs.  Large Cap Growth Profund

Ultralatin America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultralatin America Profund 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 forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Large Cap Growth

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap Growth Profund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Large Cap may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ultralatin America and Large Cap

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

The idea behind Ultralatin America Profund and Large Cap Growth Profund 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.