Correlation Between Ultra Fund and California Intermediate-ter

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

By analyzing existing cross correlation between Ultra Fund C and California Intermediate Term Tax Free, you can compare the effects of market volatilities on Ultra Fund and California Intermediate-ter 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 Ultra Fund with a short position of California Intermediate-ter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Fund and California Intermediate-ter.

Diversification Opportunities for Ultra Fund and California Intermediate-ter

-0.37

Correlation Coefficient

Ultra Fund  California Intermediate-ter

Very good diversification

The 3 months correlation between Ultra and California is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Fund C and California Intermediate Term T in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Intermediate-ter and Ultra 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 Ultra Fund C are associated (or correlated) with California Intermediate-ter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Intermediate-ter has no effect on the direction of Ultra Fund i.e., Ultra Fund and California Intermediate-ter go up and down completely randomly.

Pair Corralation between Ultra Fund and California Intermediate-ter

Assuming the 90 days horizon Ultra Fund C is expected to generate 4.99 times more return on investment than California Intermediate-ter. However, Ultra Fund is 4.99 times more volatile than California Intermediate Term Tax Free. It trades about 0.11 of its potential returns per unit of risk. California Intermediate Term Tax Free is currently generating about 0.22 per unit of risk. If you would invest  6,347  in Ultra Fund C on August 31, 2024 and sell it today you would earn a total of  172.00  from holding Ultra Fund C or generate 2.71% return on investment over 90 days.

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

Ultra Fund C  vs.  California Intermediate Term T

Ultra Fund C

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Fund C are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Ultra Fund may actually be approaching a critical reversion point that can send shares even higher in December 2024.

California Intermediate-ter

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in California Intermediate Term Tax Free are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, California Intermediate-ter is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ultra Fund and California Intermediate-ter

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

The idea behind Ultra Fund C and California Intermediate Term Tax Free 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.