Correlation Between Small Cap and Ultra Fund
Can any of the company-specific risk be diversified away by investing in both Small Cap and Ultra 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 Small Cap and Ultra Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Growth and Ultra Fund I, you can compare the effects of market volatilities on Small Cap and Ultra 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 Small Cap with a short position of Ultra Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Ultra Fund.
Diversification Opportunities for Small Cap and Ultra Fund
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and Ultra is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth and Ultra Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Fund I and Small 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 Small Cap Growth are associated (or correlated) with Ultra Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Fund I has no effect on the direction of Small Cap i.e., Small Cap and Ultra Fund go up and down completely randomly.
Pair Corralation between Small Cap and Ultra Fund
Assuming the 90 days horizon Small Cap is expected to generate 1.61 times less return on investment than Ultra Fund. In addition to that, Small Cap is 1.02 times more volatile than Ultra Fund I. It trades about 0.07 of its total potential returns per unit of risk. Ultra Fund I is currently generating about 0.11 per unit of volatility. If you would invest 5,839 in Ultra Fund I on September 19, 2024 and sell it today you would earn a total of 4,488 from holding Ultra Fund I or generate 76.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Growth vs. Ultra Fund I
Performance |
| Timeline |
| Small Cap Growth |
| Ultra Fund I |
Small Cap and Ultra Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Ultra Fund
The main advantage of trading using opposite Small Cap and Ultra Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Ultra 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 Ultra Fund will offset losses from the drop in Ultra Fund's long position.| Small Cap vs. Focused Dynamic Growth | Small Cap vs. Heritage Fund Investor | Small Cap vs. Emerging Markets Fund | Small Cap vs. Small Cap Value |
| Ultra Fund vs. Growth Portfolio Class | Ultra Fund vs. Small Cap Growth | Ultra Fund vs. Brown Advisory Sustainable | Ultra Fund vs. Morgan Stanley Multi |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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