Correlation Between Ultra Fund and Small Cap
Can any of the company-specific risk be diversified away by investing in both Ultra Fund and Small Cap 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 Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ultra Fund Investor and Small Cap Growth, you can compare the effects of market volatilities on Ultra Fund and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Fund and Small Cap.
Diversification Opportunities for Ultra Fund and Small Cap
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ultra and Small is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Fund Investor and Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth 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 Investor are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Growth has no effect on the direction of Ultra Fund i.e., Ultra Fund and Small Cap go up and down completely randomly.
Pair Corralation between Ultra Fund and Small Cap
Assuming the 90 days horizon Ultra Fund Investor is expected to generate 1.0 times more return on investment than Small Cap. However, Ultra Fund is 1.0 times more volatile than Small Cap Growth. It trades about 0.08 of its potential returns per unit of risk. Small Cap Growth is currently generating about 0.07 per unit of risk. If you would invest 6,229 in Ultra Fund Investor on August 30, 2024 and sell it today you would earn a total of 3,331 from holding Ultra Fund Investor or generate 53.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ultra Fund Investor vs. Small Cap Growth
Performance |
| Timeline |
| Ultra Fund Investor |
| Small Cap Growth |
Ultra Fund and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultra Fund and Small Cap
The main advantage of trading using opposite Ultra Fund and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Fund position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Ultra Fund vs. Growth Fund Investor | Ultra Fund vs. Select Fund Investor | Ultra Fund vs. International Growth Fund | Ultra Fund vs. Heritage Fund Investor |
| Small Cap vs. Pace High Yield | Small Cap vs. Morningstar Aggressive Growth | Small Cap vs. Strategic Allocation Aggressive | Small Cap vs. Western Asset High |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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