Correlation Between Ultrashort Japan and Ultrashort Mid-cap

Can any of the company-specific risk be diversified away by investing in both Ultrashort Japan and Ultrashort Mid-cap 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 Ultrashort Japan and Ultrashort Mid-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ultrashort Japan Profund and Ultrashort Mid Cap Profund, you can compare the effects of market volatilities on Ultrashort Japan and Ultrashort Mid-cap 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 Ultrashort Japan with a short position of Ultrashort Mid-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultrashort Japan and Ultrashort Mid-cap.

Diversification Opportunities for Ultrashort Japan and Ultrashort Mid-cap

0.94

Correlation Coefficient

Ultrashort Japan  Ultrashort Mid-cap

Almost no diversification

The 3 months correlation between Ultrashort and Ultrashort is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Ultrashort Japan Profund and Ultrashort Mid Cap Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Mid Cap and Ultrashort Japan 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 Ultrashort Japan Profund are associated (or correlated) with Ultrashort Mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Mid Cap has no effect on the direction of Ultrashort Japan i.e., Ultrashort Japan and Ultrashort Mid-cap go up and down completely randomly.

Pair Corralation between Ultrashort Japan and Ultrashort Mid-cap

Assuming the 90 days horizon Ultrashort Japan Profund is expected to generate 0.99 times more return on investment than Ultrashort Mid-cap. However, Ultrashort Japan Profund is 1.01 times less risky than Ultrashort Mid-cap. It trades about -0.17 of its potential returns per unit of risk. Ultrashort Mid Cap Profund is currently generating about -0.25 per unit of risk. If you would invest  4,700  in Ultrashort Japan Profund on February 22, 2025 and sell it today you would lose (433.00) from holding Ultrashort Japan Profund or give up 9.21% of portfolio value over 90 days.

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

Ultrashort Japan Profund  vs.  Ultrashort Mid Cap Profund

Ultrashort Japan Profund

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrashort Japan Profund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ultrashort Japan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ultrashort Mid Cap

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrashort Mid Cap Profund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ultrashort Mid-cap may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with Ultrashort Japan and Ultrashort Mid-cap

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

The idea behind Ultrashort Japan Profund and Ultrashort Mid Cap 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.