Correlation Between Power Ledger and ULT
Can any of the company-specific risk be diversified away by investing in both Power Ledger and ULT 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 Power Ledger and ULT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Ledger and ULT, you can compare the effects of market volatilities on Power Ledger and ULT 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 Power Ledger with a short position of ULT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Ledger and ULT.
Diversification Opportunities for Power Ledger and ULT
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Power and ULT is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Power Ledger and ULT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ULT and Power Ledger 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 Power Ledger are associated (or correlated) with ULT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ULT has no effect on the direction of Power Ledger i.e., Power Ledger and ULT go up and down completely randomly.
Pair Corralation between Power Ledger and ULT
Assuming the 90 days trading horizon Power Ledger is expected to generate 2.31 times more return on investment than ULT. However, Power Ledger is 2.31 times more volatile than ULT. It trades about 0.06 of its potential returns per unit of risk. ULT is currently generating about 0.03 per unit of risk. If you would invest 23.00 in Power Ledger on December 29, 2023 and sell it today you would earn a total of 17.00 from holding Power Ledger or generate 73.91% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 71.05% |
Values | Daily Returns |
Power Ledger vs. ULT
Performance |
Timeline |
Power Ledger |
ULT |
Risk-Adjusted Performance
0 of 100
Low | High |
Very Weak
Power Ledger and ULT Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Power Ledger and ULT
The main advantage of trading using opposite Power Ledger and ULT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Ledger position performs unexpectedly, ULT 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 ULT will offset losses from the drop in ULT's long position.The idea behind Power Ledger and ULT 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.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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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