Correlation Between Financials Ultrasector and Bear Profund

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

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

Diversification Opportunities for Financials Ultrasector and Bear Profund

-0.96

Correlation Coefficient

Financials Ultrasector  Bear Profund

Pay attention - limited upside

The 3 months correlation between Financials and Bear is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding Financials Ultrasector Profund and Bear Profund Bear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bear Profund Bear and Financials Ultrasector 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 Financials Ultrasector Profund are associated (or correlated) with Bear Profund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bear Profund Bear has no effect on the direction of Financials Ultrasector i.e., Financials Ultrasector and Bear Profund go up and down completely randomly.

Pair Corralation between Financials Ultrasector and Bear Profund

Assuming the 90 days horizon Financials Ultrasector Profund is expected to under-perform the Bear Profund. In addition to that, Financials Ultrasector is 1.43 times more volatile than Bear Profund Bear. It trades about 0.0 of its total potential returns per unit of risk. Bear Profund Bear is currently generating about 0.02 per unit of volatility. If you would invest  1,049  in Bear Profund Bear on February 18, 2025 and sell it today you would earn a total of  15.00  from holding Bear Profund Bear or generate 1.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Financials Ultrasector Profund  vs.  Bear Profund Bear

Financials Ultrasector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Financials Ultrasector Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Financials Ultrasector is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bear Profund Bear

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bear Profund Bear are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Bear Profund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Financials Ultrasector and Bear Profund

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

The idea behind Financials Ultrasector Profund and Bear Profund Bear 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.