Correlation Between Ultra Nasdaq and Ultramid-cap Profund

Can any of the company-specific risk be diversified away by investing in both Ultra Nasdaq and Ultramid-cap 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 Ultra Nasdaq and Ultramid-cap Profund 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 Ultramid Cap Profund Ultramid Cap, you can compare the effects of market volatilities on Ultra Nasdaq and Ultramid-cap 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 Ultra Nasdaq with a short position of Ultramid-cap Profund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Nasdaq and Ultramid-cap Profund.

Diversification Opportunities for Ultra Nasdaq and Ultramid-cap Profund

0.04

Correlation Coefficient

Ultra Nasdaq  Ultramid-cap Profund

Significant diversification

The 3 months correlation between Ultra and Ultramid-cap is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Nasdaq 100 Profunds and Ultramid Cap Profund Ultramid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultramid Cap Profund and Ultra Nasdaq 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 Ultramid-cap Profund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultramid Cap Profund has no effect on the direction of Ultra Nasdaq i.e., Ultra Nasdaq and Ultramid-cap Profund go up and down completely randomly.

Pair Corralation between Ultra Nasdaq and Ultramid-cap Profund

Assuming the 90 days horizon Ultra Nasdaq 100 Profunds is expected to generate 1.21 times more return on investment than Ultramid-cap Profund. However, Ultra Nasdaq is 1.21 times more volatile than Ultramid Cap Profund Ultramid Cap. It trades about 0.09 of its potential returns per unit of risk. Ultramid Cap Profund Ultramid Cap is currently generating about -0.02 per unit of risk. If you would invest  11,190  in Ultra Nasdaq 100 Profunds on November 20, 2024 and sell it today you would earn a total of  1,256  from holding Ultra Nasdaq 100 Profunds or generate 11.22% return on investment over 90 days.

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

Ultra Nasdaq 100 Profunds  vs.  Ultramid Cap Profund Ultramid

Ultra Nasdaq 100

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Nasdaq 100 Profunds are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ultra Nasdaq showed solid returns over the last few months and may actually be approaching a breakup point.

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 fairly strong forward indicators, Ultramid-cap Profund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ultra Nasdaq and Ultramid-cap Profund

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

The idea behind Ultra Nasdaq 100 Profunds and Ultramid Cap Profund Ultramid Cap 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .