Correlation Between Ultrabull Profund and Banks Ultrasector

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

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

Diversification Opportunities for Ultrabull Profund and Banks Ultrasector

0.82

Correlation Coefficient

Ultrabull Profund  Banks Ultrasector

Very poor diversification

The 3 months correlation between Ultrabull and BANKS is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ultrabull Profund Ultrabull and Banks Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banks Ultrasector Profund and Ultrabull Profund 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 Ultrabull Profund Ultrabull are associated (or correlated) with Banks Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banks Ultrasector Profund has no effect on the direction of Ultrabull Profund i.e., Ultrabull Profund and Banks Ultrasector go up and down completely randomly.

Pair Corralation between Ultrabull Profund and Banks Ultrasector

Assuming the 90 days horizon Ultrabull Profund Ultrabull is expected to generate 0.99 times more return on investment than Banks Ultrasector. However, Ultrabull Profund Ultrabull is 1.01 times less risky than Banks Ultrasector. It trades about -0.35 of its potential returns per unit of risk. Banks Ultrasector Profund is currently generating about -0.42 per unit of risk. If you would invest  10,597  in Ultrabull Profund Ultrabull on December 10, 2024 and sell it today you would lose (1,579) from holding Ultrabull Profund Ultrabull or give up 14.9% of portfolio value over 90 days.

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

Ultrabull Profund Ultrabull  vs.  Banks Ultrasector Profund

Ultrabull Profund

Risk-Adjusted Performance

Very Weak

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

Banks Ultrasector Profund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Banks Ultrasector 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 April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Ultrabull Profund and Banks Ultrasector

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

The idea behind Ultrabull Profund Ultrabull and Banks Ultrasector 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.