Correlation Between Us Government and Ultrasmall Cap

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

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

Diversification Opportunities for Us Government and Ultrasmall Cap

-0.43

Correlation Coefficient

Us Government  Ultrasmall Cap

Very good diversification

The 3 months correlation between GVPSX and Ultrasmall is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Plus and Ultrasmall Cap Profund Ultrasm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrasmall Cap Profund and Us Government 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 Us Government Plus are associated (or correlated) with Ultrasmall Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrasmall Cap Profund has no effect on the direction of Us Government i.e., Us Government and Ultrasmall Cap go up and down completely randomly.

Pair Corralation between Us Government and Ultrasmall Cap

Assuming the 90 days horizon Us Government Plus is expected to under-perform the Ultrasmall Cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Us Government Plus is 2.04 times less risky than Ultrasmall Cap. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Ultrasmall Cap Profund Ultrasmall Cap is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,041  in Ultrasmall Cap Profund Ultrasmall Cap on September 19, 2024 and sell it today you would earn a total of  1,804  from holding Ultrasmall Cap Profund Ultrasmall Cap or generate 44.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Us Government Plus  vs.  Ultrasmall Cap Profund Ultrasm

Us Government Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Us Government Plus has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Ultrasmall Cap Profund

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Ultrasmall Cap Profund Ultrasmall Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ultrasmall Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Us Government and Ultrasmall Cap

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

The idea behind Us Government Plus and Ultrasmall Cap Profund Ultrasmall Cap 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.