Correlation Between Ultra Fund and Select Fund
Can any of the company-specific risk be diversified away by investing in both Ultra Fund and Select 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 Ultra Fund and Select Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ultra Fund A and Select Fund A, you can compare the effects of market volatilities on Ultra Fund and Select 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 Ultra Fund with a short position of Select Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Fund and Select Fund.
Diversification Opportunities for Ultra Fund and Select Fund
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ultra and Select is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Fund A and Select Fund A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund A 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 A are associated (or correlated) with Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund A has no effect on the direction of Ultra Fund i.e., Ultra Fund and Select Fund go up and down completely randomly.
Pair Corralation between Ultra Fund and Select Fund
Assuming the 90 days horizon Ultra Fund A is expected to generate 1.05 times more return on investment than Select Fund. However, Ultra Fund is 1.05 times more volatile than Select Fund A. It trades about 0.09 of its potential returns per unit of risk. Select Fund A is currently generating about 0.08 per unit of risk. If you would invest 5,535 in Ultra Fund A on October 21, 2024 and sell it today you would earn a total of 3,129 from holding Ultra Fund A or generate 56.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ultra Fund A vs. Select Fund A
Performance |
| Timeline |
| Ultra Fund A |
| Select Fund A |
Ultra Fund and Select Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultra Fund and Select Fund
The main advantage of trading using opposite Ultra Fund and Select Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Fund position performs unexpectedly, Select 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 Select Fund will offset losses from the drop in Select Fund's long position.| Ultra Fund vs. T Rowe Price | Ultra Fund vs. Federated Global Allocation | Ultra Fund vs. Tax Managed Large Cap | Ultra Fund vs. Qs Large Cap |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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