Correlation Between Ultra Fund and Csjxx

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

By analyzing existing cross correlation between Ultra Fund R6 and Csjxx, you can compare the effects of market volatilities on Ultra Fund and Csjxx 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 Csjxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Fund and Csjxx.

Diversification Opportunities for Ultra Fund and Csjxx

-0.63

Correlation Coefficient

Ultra Fund  Csjxx

Excellent diversification

The 3 months correlation between Ultra and Csjxx is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Fund R6 and Csjxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Csjxx 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 R6 are associated (or correlated) with Csjxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Csjxx has no effect on the direction of Ultra Fund i.e., Ultra Fund and Csjxx go up and down completely randomly.

Pair Corralation between Ultra Fund and Csjxx

Assuming the 90 days horizon Ultra Fund is expected to generate 24.72 times less return on investment than Csjxx. But when comparing it to its historical volatility, Ultra Fund R6 is 45.78 times less risky than Csjxx. It trades about 0.12 of its potential returns per unit of risk. Csjxx is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  494.00  in Csjxx on September 29, 2024 and sell it today you would lose (394.00) from holding Csjxx or give up 79.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Ultra Fund R6  vs.  Csjxx

Ultra Fund R6

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Fund R6 are ranked lower than 9 (%) 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 January 2025.

Csjxx

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Csjxx are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Csjxx showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ultra Fund and Csjxx

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

The idea behind Ultra Fund R6 and Csjxx 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.