Correlation Between Value Fund and Semiconductor Ultrasector

Can any of the company-specific risk be diversified away by investing in both Value Fund and Semiconductor Ultrasector 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 Value Fund and Semiconductor Ultrasector into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Value Fund I and Semiconductor Ultrasector Profund, you can compare the effects of market volatilities on Value Fund and Semiconductor Ultrasector 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 Value Fund with a short position of Semiconductor Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Semiconductor Ultrasector.

Diversification Opportunities for Value Fund and Semiconductor Ultrasector

0.93

Correlation Coefficient

Value Fund  Semiconductor Ultrasector

Almost no diversification

The 3 months correlation between Value and Semiconductor is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund I and Semiconductor Ultrasector Prof in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semiconductor Ultrasector and Value 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 Value Fund I are associated (or correlated) with Semiconductor Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semiconductor Ultrasector has no effect on the direction of Value Fund i.e., Value Fund and Semiconductor Ultrasector go up and down completely randomly.

Pair Corralation between Value Fund and Semiconductor Ultrasector

Assuming the 90 days horizon Value Fund is expected to generate 10.09 times less return on investment than Semiconductor Ultrasector. But when comparing it to its historical volatility, Value Fund I is 3.23 times less risky than Semiconductor Ultrasector. It trades about 0.11 of its potential returns per unit of risk. Semiconductor Ultrasector Profund is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  3,471  in Semiconductor Ultrasector Profund on May 11, 2025 and sell it today you would earn a total of  2,032  from holding Semiconductor Ultrasector Profund or generate 58.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Value Fund I  vs.  Semiconductor Ultrasector Prof

Value Fund I

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Value Fund I are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Value Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Semiconductor Ultrasector

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Semiconductor Ultrasector Profund are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Semiconductor Ultrasector showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Value Fund and Semiconductor Ultrasector

The main advantage of trading using opposite Value Fund and Semiconductor Ultrasector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund position performs unexpectedly, Semiconductor Ultrasector 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 Semiconductor Ultrasector will offset losses from the drop in Semiconductor Ultrasector's long position.

The idea behind Value Fund I and Semiconductor Ultrasector Profund 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.