Correlation Between Growth Portfolio and Ultra Fund

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

By analyzing existing cross correlation between Growth Portfolio Class and Ultra Fund I, you can compare the effects of market volatilities on Growth Portfolio and Ultra Fund 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 Growth Portfolio with a short position of Ultra Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Portfolio and Ultra Fund.

Diversification Opportunities for Growth Portfolio and Ultra Fund

0.9

Correlation Coefficient

Growth Portfolio  Ultra Fund

Almost no diversification

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

Pair Corralation between Growth Portfolio and Ultra Fund

Assuming the 90 days horizon Growth Portfolio Class is expected to generate 1.66 times more return on investment than Ultra Fund. However, Growth Portfolio is 1.66 times more volatile than Ultra Fund I. It trades about 0.25 of its potential returns per unit of risk. Ultra Fund I is currently generating about 0.09 per unit of risk. If you would invest  3,947  in Growth Portfolio Class on September 25, 2024 and sell it today you would earn a total of  1,258  from holding Growth Portfolio Class or generate 31.87% return on investment over 90 days.

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

Growth Portfolio Class  vs.  Ultra Fund I

Growth Portfolio Class

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Portfolio Class are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Growth Portfolio showed solid returns over the last few months and may actually be approaching a breakup point.

Ultra Fund I

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Fund I are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ultra Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Growth Portfolio and Ultra Fund

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

The idea behind Growth Portfolio Class and Ultra Fund I 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.