Correlation Between Equity Income and Ultra Fund
Can any of the company-specific risk be diversified away by investing in both Equity Income 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 Equity Income and Ultra Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Income Fund and Ultra Fund Investor, you can compare the effects of market volatilities on Equity Income 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 Equity Income with a short position of Ultra Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Income and Ultra Fund.
Diversification Opportunities for Equity Income and Ultra Fund
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Equity and Ultra is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Equity Income Fund and Ultra Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Fund Investor and Equity Income 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 Equity Income Fund 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 Investor has no effect on the direction of Equity Income i.e., Equity Income and Ultra Fund go up and down completely randomly.
Pair Corralation between Equity Income and Ultra Fund
Assuming the 90 days horizon Equity Income is expected to generate 2.17 times less return on investment than Ultra Fund. But when comparing it to its historical volatility, Equity Income Fund is 2.08 times less risky than Ultra Fund. It trades about 0.12 of its potential returns per unit of risk. Ultra Fund Investor is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 9,076 in Ultra Fund Investor on August 26, 2024 and sell it today you would earn a total of 481.00 from holding Ultra Fund Investor or generate 5.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Income Fund vs. Ultra Fund Investor
Performance |
| Timeline |
| Equity Income |
| Ultra Fund Investor |
Equity Income and Ultra Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Income and Ultra Fund
The main advantage of trading using opposite Equity Income and Ultra Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Income 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.| Equity Income vs. Barings Active Short | Equity Income vs. Multisector Bond Sma | Equity Income vs. T Rowe Price | Equity Income vs. Kinetics Spin Off And |
| Ultra Fund vs. Growth Fund Investor | Ultra Fund vs. Select Fund Investor | Ultra Fund vs. International Growth Fund | Ultra Fund vs. Heritage Fund Investor |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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