Correlation Between Ultra Nasdaq-100 and Paradigm Micro-cap
Can any of the company-specific risk be diversified away by investing in both Ultra Nasdaq-100 and Paradigm Micro-cap 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 Nasdaq-100 and Paradigm Micro-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ultra Nasdaq 100 Profunds and Paradigm Micro Cap Fund, you can compare the effects of market volatilities on Ultra Nasdaq-100 and Paradigm Micro-cap 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 Nasdaq-100 with a short position of Paradigm Micro-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Nasdaq-100 and Paradigm Micro-cap.
Diversification Opportunities for Ultra Nasdaq-100 and Paradigm Micro-cap
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ultra and Paradigm is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Nasdaq 100 Profunds and Paradigm Micro Cap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradigm Micro Cap and Ultra Nasdaq-100 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 Nasdaq 100 Profunds are associated (or correlated) with Paradigm Micro-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradigm Micro Cap has no effect on the direction of Ultra Nasdaq-100 i.e., Ultra Nasdaq-100 and Paradigm Micro-cap go up and down completely randomly.
Pair Corralation between Ultra Nasdaq-100 and Paradigm Micro-cap
Assuming the 90 days horizon Ultra Nasdaq-100 is expected to generate 1.09 times less return on investment than Paradigm Micro-cap. In addition to that, Ultra Nasdaq-100 is 1.4 times more volatile than Paradigm Micro Cap Fund. It trades about 0.08 of its total potential returns per unit of risk. Paradigm Micro Cap Fund is currently generating about 0.12 per unit of volatility. If you would invest 5,713 in Paradigm Micro Cap Fund on August 26, 2024 and sell it today you would earn a total of 238.00 from holding Paradigm Micro Cap Fund or generate 4.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ultra Nasdaq 100 Profunds vs. Paradigm Micro Cap Fund
Performance |
| Timeline |
| Ultra Nasdaq 100 |
| Paradigm Micro Cap |
Ultra Nasdaq-100 and Paradigm Micro-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultra Nasdaq-100 and Paradigm Micro-cap
The main advantage of trading using opposite Ultra Nasdaq-100 and Paradigm Micro-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Nasdaq-100 position performs unexpectedly, Paradigm Micro-cap 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 Paradigm Micro-cap will offset losses from the drop in Paradigm Micro-cap's long position.| Ultra Nasdaq-100 vs. Short Real Estate | Ultra Nasdaq-100 vs. Short Real Estate | Ultra Nasdaq-100 vs. Technology Ultrasector Profund | Ultra Nasdaq-100 vs. Technology Ultrasector Profund |
| Paradigm Micro-cap vs. Paradigm Select Fund | Paradigm Micro-cap vs. Needham Aggressive Growth | Paradigm Micro-cap vs. Ultramid Cap Profund Ultramid Cap | Paradigm Micro-cap vs. Towle Deep Value |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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