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 R5, 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 R5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Fund R5 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 R5 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 1.92 times less return on investment than Ultra Fund. But when comparing it to its historical volatility, Equity Income Fund is 1.94 times less risky than Ultra Fund. It trades about 0.09 of its potential returns per unit of risk. Ultra Fund R5 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 7,967 in Ultra Fund R5 on August 25, 2024 and sell it today you would earn a total of 2,205 from holding Ultra Fund R5 or generate 27.68% 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 R5
Performance |
| Timeline |
| Equity Income |
| Ultra Fund R5 |
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. Value Fund Investor | Equity Income vs. Heritage Fund Investor | Equity Income vs. Equity Growth Fund | Equity Income vs. Mid Cap Value |
| Ultra Fund vs. International Growth Fund | Ultra Fund vs. Heritage Fund Investor | Ultra Fund vs. Janus Global Research |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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