Correlation Between Large Capitalization and Semiconductor Ultrasector

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

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

Diversification Opportunities for Large Capitalization and Semiconductor Ultrasector

0.64

Correlation Coefficient

Large Capitalization  Semiconductor Ultrasector

Poor diversification

The 3 months correlation between Large and Semiconductor is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Large Capitalization Growth and Semiconductor Ultrasector Prof in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semiconductor Ultrasector and Large Capitalization 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 Large Capitalization Growth 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 Large Capitalization i.e., Large Capitalization and Semiconductor Ultrasector go up and down completely randomly.

Pair Corralation between Large Capitalization and Semiconductor Ultrasector

Assuming the 90 days horizon Large Capitalization is expected to generate 4.25 times less return on investment than Semiconductor Ultrasector. But when comparing it to its historical volatility, Large Capitalization Growth is 2.48 times less risky than Semiconductor Ultrasector. It trades about 0.18 of its potential returns per unit of risk. Semiconductor Ultrasector Profund is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  3,711  in Semiconductor Ultrasector Profund on May 13, 2025 and sell it today you would earn a total of  1,792  from holding Semiconductor Ultrasector Profund or generate 48.29% return on investment over 90 days.

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

Large Capitalization Growth  vs.  Semiconductor Ultrasector Prof

Large Capitalization

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Large Capitalization Growth are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Large Capitalization may actually be approaching a critical reversion point that can send shares even higher in September 2025.

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 24 (%) 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 Large Capitalization and Semiconductor Ultrasector

The main advantage of trading using opposite Large Capitalization and Semiconductor Ultrasector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Capitalization 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 Large Capitalization Growth 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.