Correlation Between Ultra Fund and Select Fund

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

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

Diversification Opportunities for Ultra Fund and Select Fund

0.97

Correlation Coefficient

Ultra Fund  Select Fund

Almost no diversification

The 3 months correlation between Ultra and Select is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Fund R and Select Fund R in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund R and Ultra Fund 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 Fund R are associated (or correlated) with Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund R has no effect on the direction of Ultra Fund i.e., Ultra Fund and Select Fund go up and down completely randomly.

Pair Corralation between Ultra Fund and Select Fund

Assuming the 90 days horizon Ultra Fund R is expected to generate 0.99 times more return on investment than Select Fund. However, Ultra Fund R is 1.01 times less risky than Select Fund. It trades about 0.41 of its potential returns per unit of risk. Select Fund R is currently generating about 0.37 per unit of risk. If you would invest  6,826  in Ultra Fund R on February 21, 2024 and sell it today you would earn a total of  575.00  from holding Ultra Fund R or generate 8.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Ultra Fund R  vs.  Select Fund R

Ultra Fund R

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Fund R are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly unsteady basic indicators, Ultra Fund may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Select Fund R

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Select Fund R are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly unsteady basic indicators, Select Fund may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Ultra Fund and Select Fund

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

The idea behind Ultra Fund R and Select Fund R 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.