Correlation Between Ultramid Cap and Large Cap

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

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

Diversification Opportunities for Ultramid Cap and Large Cap

0.79

Correlation Coefficient

Ultramid Cap  Large Cap

Poor diversification

The 3 months correlation between Ultramid and Large is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Ultramid Cap Profund Ultramid and Large Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Value and Ultramid 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 Ultramid Cap Profund Ultramid Cap 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 Value has no effect on the direction of Ultramid Cap i.e., Ultramid Cap and Large Cap go up and down completely randomly.

Pair Corralation between Ultramid Cap and Large Cap

Assuming the 90 days horizon Ultramid Cap Profund Ultramid Cap is expected to under-perform the Large Cap. In addition to that, Ultramid Cap is 2.14 times more volatile than Large Cap Value. It trades about -0.1 of its total potential returns per unit of risk. Large Cap Value is currently generating about -0.02 per unit of volatility. If you would invest  2,348  in Large Cap Value on December 30, 2024 and sell it today you would lose (38.00) from holding Large Cap Value or give up 1.62% of portfolio value over 90 days.

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

Ultramid Cap Profund Ultramid   vs.  Large Cap Value

Ultramid Cap Profund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultramid Cap Profund Ultramid Cap 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.

Large Cap Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Large Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Large Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ultramid Cap and Large Cap

The main advantage of trading using opposite Ultramid Cap and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultramid Cap 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 Ultramid Cap Profund Ultramid Cap and Large Cap Value 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.