Correlation Between Strategic Allocation: and Ultra Fund
Can any of the company-specific risk be diversified away by investing in both Strategic Allocation: 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 Strategic Allocation: and Ultra Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Allocation Moderate and Ultra Fund R5, you can compare the effects of market volatilities on Strategic Allocation: 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 Strategic Allocation: with a short position of Ultra Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Allocation: and Ultra Fund.
Diversification Opportunities for Strategic Allocation: and Ultra Fund
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Strategic and ULTRA is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Moderate 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 Strategic Allocation: 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 Strategic Allocation Moderate 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 Strategic Allocation: i.e., Strategic Allocation: and Ultra Fund go up and down completely randomly.
Pair Corralation between Strategic Allocation: and Ultra Fund
Assuming the 90 days horizon Strategic Allocation: is expected to generate 1.24 times less return on investment than Ultra Fund. But when comparing it to its historical volatility, Strategic Allocation Moderate is 2.25 times less risky than Ultra Fund. It trades about 0.23 of its potential returns per unit of risk. Ultra Fund R5 is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 9,929 in Ultra Fund R5 on August 29, 2024 and sell it today you would earn a total of 317.00 from holding Ultra Fund R5 or generate 3.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Strategic Allocation Moderate vs. Ultra Fund R5
Performance |
| Timeline |
| Strategic Allocation: |
| Ultra Fund R5 |
Strategic Allocation: and Ultra Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Allocation: and Ultra Fund
The main advantage of trading using opposite Strategic Allocation: and Ultra Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Allocation: 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.The idea behind Strategic Allocation Moderate and Ultra Fund R5 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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