Correlation Between Ultra Fund and Equity Growth
Can any of the company-specific risk be diversified away by investing in both Ultra Fund and Equity Growth 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 Equity Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ultra Fund I and Equity Growth Fund, you can compare the effects of market volatilities on Ultra Fund and Equity Growth 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 Equity Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Fund and Equity Growth.
Diversification Opportunities for Ultra Fund and Equity Growth
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ultra and Equity is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Fund I and Equity Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity 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 I are associated (or correlated) with Equity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Growth has no effect on the direction of Ultra Fund i.e., Ultra Fund and Equity Growth go up and down completely randomly.
Pair Corralation between Ultra Fund and Equity Growth
Assuming the 90 days horizon Ultra Fund is expected to generate 1.9 times less return on investment than Equity Growth. In addition to that, Ultra Fund is 1.31 times more volatile than Equity Growth Fund. It trades about 0.07 of its total potential returns per unit of risk. Equity Growth Fund is currently generating about 0.19 per unit of volatility. If you would invest 3,320 in Equity Growth Fund on August 30, 2024 and sell it today you would earn a total of 116.00 from holding Equity Growth Fund or generate 3.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ultra Fund I vs. Equity Growth Fund
Performance |
| Timeline |
| Ultra Fund I |
| Equity Growth |
Ultra Fund and Equity Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultra Fund and Equity Growth
The main advantage of trading using opposite Ultra Fund and Equity Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Fund position performs unexpectedly, Equity Growth 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 Equity Growth will offset losses from the drop in Equity Growth's long position.| Ultra Fund vs. Ultra Fund A | Ultra Fund vs. Select Fund I | Ultra Fund vs. Value Fund I | Ultra Fund vs. Income Growth Fund |
| Equity Growth vs. Mid Cap Value | Equity Growth vs. Income Growth Fund | Equity Growth vs. Diversified Bond Fund | Equity Growth vs. Emerging Markets Fund |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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