Correlation Between Utilities Ultrasector and Balanced Strategy

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

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

Diversification Opportunities for Utilities Ultrasector and Balanced Strategy

0.75

Correlation Coefficient

Utilities Ultrasector  Balanced Strategy

Poor diversification

The 3 months correlation between Utilities and Balanced is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Utilities Ultrasector Profund and Balanced Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Strategy and Utilities 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 Utilities Ultrasector Profund are associated (or correlated) with Balanced Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Strategy has no effect on the direction of Utilities Ultrasector i.e., Utilities Ultrasector and Balanced Strategy go up and down completely randomly.

Pair Corralation between Utilities Ultrasector and Balanced Strategy

Assuming the 90 days horizon Utilities Ultrasector Profund is expected to generate 3.27 times more return on investment than Balanced Strategy. However, Utilities Ultrasector is 3.27 times more volatile than Balanced Strategy Fund. It trades about 0.16 of its potential returns per unit of risk. Balanced Strategy Fund is currently generating about 0.2 per unit of risk. If you would invest  7,333  in Utilities Ultrasector Profund on May 10, 2025 and sell it today you would earn a total of  1,007  from holding Utilities Ultrasector Profund or generate 13.73% return on investment over 90 days.

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

Utilities Ultrasector Profund  vs.  Balanced Strategy Fund

Utilities Ultrasector

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Ultrasector Profund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Utilities Ultrasector showed solid returns over the last few months and may actually be approaching a breakup point.

Balanced Strategy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Strategy Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Balanced Strategy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Utilities Ultrasector and Balanced Strategy

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

The idea behind Utilities Ultrasector Profund and Balanced Strategy Fund 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.