Correlation Between Ultramid Cap and Ultrashort Japan

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

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

Diversification Opportunities for Ultramid Cap and Ultrashort Japan

-0.9

Correlation Coefficient

Ultramid Cap  Ultrashort Japan

Pay attention - limited upside

The 3 months correlation between Ultramid and Ultrashort is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Ultramid Cap Profund Ultramid and Ultrashort Japan Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Japan Profund and Ultramid Cap 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 Ultramid Cap Profund Ultramid Cap are associated (or correlated) with Ultrashort Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Japan Profund has no effect on the direction of Ultramid Cap i.e., Ultramid Cap and Ultrashort Japan go up and down completely randomly.

Pair Corralation between Ultramid Cap and Ultrashort Japan

Assuming the 90 days horizon Ultramid Cap Profund Ultramid Cap is expected to under-perform the Ultrashort Japan. In addition to that, Ultramid Cap is 1.18 times more volatile than Ultrashort Japan Profund. It trades about -0.06 of its total potential returns per unit of risk. Ultrashort Japan Profund is currently generating about 0.05 per unit of volatility. If you would invest  3,989  in Ultrashort Japan Profund on February 3, 2025 and sell it today you would earn a total of  264.00  from holding Ultrashort Japan Profund or generate 6.62% return on investment over 90 days.

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

Ultramid Cap Profund Ultramid   vs.  Ultrashort Japan Profund

Ultramid Cap Profund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultramid Cap Profund Ultramid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in June 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Ultrashort Japan Profund

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrashort Japan Profund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ultrashort Japan may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with Ultramid Cap and Ultrashort Japan

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

The idea behind Ultramid Cap Profund Ultramid Cap and Ultrashort Japan 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.