Correlation Between Ultra Fund and Strategic Allocation
Can any of the company-specific risk be diversified away by investing in both Ultra Fund and Strategic Allocation 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 Strategic Allocation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ultra Fund C and Strategic Allocation Servative, you can compare the effects of market volatilities on Ultra Fund and Strategic Allocation 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 Strategic Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Fund and Strategic Allocation.
Diversification Opportunities for Ultra Fund and Strategic Allocation
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ultra and Strategic is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Fund C and Strategic Allocation Servative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Allocation 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 C are associated (or correlated) with Strategic Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Allocation has no effect on the direction of Ultra Fund i.e., Ultra Fund and Strategic Allocation go up and down completely randomly.
Pair Corralation between Ultra Fund and Strategic Allocation
Assuming the 90 days horizon Ultra Fund C is expected to generate 3.02 times more return on investment than Strategic Allocation. However, Ultra Fund is 3.02 times more volatile than Strategic Allocation Servative. It trades about 0.1 of its potential returns per unit of risk. Strategic Allocation Servative is currently generating about 0.13 per unit of risk. If you would invest 5,229 in Ultra Fund C on August 28, 2024 and sell it today you would earn a total of 1,288 from holding Ultra Fund C or generate 24.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ultra Fund C vs. Strategic Allocation Servative
Performance |
| Timeline |
| Ultra Fund C |
| Strategic Allocation |
Ultra Fund and Strategic Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultra Fund and Strategic Allocation
The main advantage of trading using opposite Ultra Fund and Strategic Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Fund position performs unexpectedly, Strategic Allocation 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 Strategic Allocation will offset losses from the drop in Strategic Allocation's long position.| Ultra Fund vs. Ultra Fund R6 | Ultra Fund vs. Select Fund C | Ultra Fund vs. Ultra Fund R | Ultra Fund vs. Select Fund R |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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