Correlation Between Ultra Nasdaq-100 and Technology Ultrasector

Can any of the company-specific risk be diversified away by investing in both Ultra Nasdaq-100 and Technology 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 Ultra Nasdaq-100 and Technology Ultrasector into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ultra Nasdaq 100 Profunds and Technology Ultrasector Profund, you can compare the effects of market volatilities on Ultra Nasdaq-100 and Technology 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 Ultra Nasdaq-100 with a short position of Technology Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Nasdaq-100 and Technology Ultrasector.

Diversification Opportunities for Ultra Nasdaq-100 and Technology Ultrasector

0.92

Correlation Coefficient

Ultra Nasdaq-100  Technology Ultrasector

Almost no diversification

The 3 months correlation between Ultra and Technology is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Nasdaq 100 Profunds and Technology Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Ultrasector and Ultra Nasdaq-100 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 Nasdaq 100 Profunds are associated (or correlated) with Technology Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Ultrasector has no effect on the direction of Ultra Nasdaq-100 i.e., Ultra Nasdaq-100 and Technology Ultrasector go up and down completely randomly.

Pair Corralation between Ultra Nasdaq-100 and Technology Ultrasector

Assuming the 90 days horizon Ultra Nasdaq 100 Profunds is expected to under-perform the Technology Ultrasector. In addition to that, Ultra Nasdaq-100 is 1.11 times more volatile than Technology Ultrasector Profund. It trades about -0.11 of its total potential returns per unit of risk. Technology Ultrasector Profund is currently generating about -0.12 per unit of volatility. If you would invest  3,702  in Technology Ultrasector Profund on December 30, 2024 and sell it today you would lose (691.00) from holding Technology Ultrasector Profund or give up 18.67% of portfolio value over 90 days.

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

Ultra Nasdaq 100 Profunds  vs.  Technology Ultrasector Profund

Ultra Nasdaq 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultra Nasdaq 100 Profunds 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.

Technology Ultrasector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Technology 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 Ultra Nasdaq-100 and Technology Ultrasector

The main advantage of trading using opposite Ultra Nasdaq-100 and Technology Ultrasector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Nasdaq-100 position performs unexpectedly, Technology 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 Technology Ultrasector will offset losses from the drop in Technology Ultrasector's long position.

The idea behind Ultra Nasdaq 100 Profunds and Technology 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 Transaction History module to view history of all your transactions and understand their impact on performance.