Correlation Between Quant and ULT
Can any of the company-specific risk be diversified away by investing in both Quant 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 Quant and ULT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Quant and ULT, you can compare the effects of market volatilities on Quant 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 Quant with a short position of ULT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quant and ULT.
Diversification Opportunities for Quant and ULT
Very good diversification
The 3 months correlation between Quant and ULT is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Quant and ULT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ULT and Quant 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 Quant 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 Quant i.e., Quant and ULT go up and down completely randomly.
Pair Corralation between Quant and ULT
If you would invest 10,879 in Quant on January 26, 2024 and sell it today you would lose (94.00) from holding Quant or give up 0.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 1.56% |
| Values | Daily Returns |
Quant vs. ULT
Performance |
| Timeline |
| Quant |
| ULT |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Quant and ULT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Quant and ULT
The main advantage of trading using opposite Quant and ULT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quant 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 Quant 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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