Correlation Between Financials Ultrasector and Old Westbury

Can any of the company-specific risk be diversified away by investing in both Financials Ultrasector and Old Westbury 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 Old Westbury 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 Old Westbury Large, you can compare the effects of market volatilities on Financials Ultrasector and Old Westbury 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 Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financials Ultrasector and Old Westbury.

Diversification Opportunities for Financials Ultrasector and Old Westbury

0.91

Correlation Coefficient

Financials Ultrasector  Old Westbury

Almost no diversification

The 3 months correlation between Financials and Old is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Financials Ultrasector Profund and Old Westbury Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Large 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 Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Large has no effect on the direction of Financials Ultrasector i.e., Financials Ultrasector and Old Westbury go up and down completely randomly.

Pair Corralation between Financials Ultrasector and Old Westbury

Assuming the 90 days horizon Financials Ultrasector Profund is expected to generate 2.27 times more return on investment than Old Westbury. However, Financials Ultrasector is 2.27 times more volatile than Old Westbury Large. It trades about 0.15 of its potential returns per unit of risk. Old Westbury Large is currently generating about 0.34 per unit of risk. If you would invest  4,133  in Financials Ultrasector Profund on May 1, 2025 and sell it today you would earn a total of  490.00  from holding Financials Ultrasector Profund or generate 11.86% return on investment over 90 days.

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

Financials Ultrasector Profund  vs.  Old Westbury Large

Financials Ultrasector

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Financials Ultrasector Profund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Financials Ultrasector may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Old Westbury Large

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Old Westbury Large are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Old Westbury may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Financials Ultrasector and Old Westbury

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

The idea behind Financials Ultrasector Profund and Old Westbury Large 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.