Correlation Between Pharmaceuticals Ultrasector and Ultra Nasdaq-100

Can any of the company-specific risk be diversified away by investing in both Pharmaceuticals Ultrasector and Ultra Nasdaq-100 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 Pharmaceuticals Ultrasector and Ultra Nasdaq-100 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pharmaceuticals Ultrasector Profund and Ultra Nasdaq 100 Profunds, you can compare the effects of market volatilities on Pharmaceuticals Ultrasector and Ultra Nasdaq-100 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 Pharmaceuticals Ultrasector with a short position of Ultra Nasdaq-100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pharmaceuticals Ultrasector and Ultra Nasdaq-100.

Diversification Opportunities for Pharmaceuticals Ultrasector and Ultra Nasdaq-100

0.75

Correlation Coefficient

Pharmaceuticals Ultrasector  Ultra Nasdaq-100

Poor diversification

The 3 months correlation between Pharmaceuticals and Ultra is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Pharmaceuticals Ultrasector Pr and Ultra Nasdaq 100 Profunds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Nasdaq 100 and Pharmaceuticals 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 Pharmaceuticals Ultrasector Profund are associated (or correlated) with Ultra Nasdaq-100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Nasdaq 100 has no effect on the direction of Pharmaceuticals Ultrasector i.e., Pharmaceuticals Ultrasector and Ultra Nasdaq-100 go up and down completely randomly.

Pair Corralation between Pharmaceuticals Ultrasector and Ultra Nasdaq-100

Assuming the 90 days horizon Pharmaceuticals Ultrasector is expected to generate 2.21 times less return on investment than Ultra Nasdaq-100. But when comparing it to its historical volatility, Pharmaceuticals Ultrasector Profund is 1.28 times less risky than Ultra Nasdaq-100. It trades about 0.08 of its potential returns per unit of risk. Ultra Nasdaq 100 Profunds is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  9,601  in Ultra Nasdaq 100 Profunds on September 3, 2024 and sell it today you would earn a total of  1,662  from holding Ultra Nasdaq 100 Profunds or generate 17.31% return on investment over 90 days.

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

Pharmaceuticals Ultrasector Pr  vs.  Ultra Nasdaq 100 Profunds

Pharmaceuticals Ultrasector

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pharmaceuticals Ultrasector Profund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Pharmaceuticals Ultrasector may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ultra Nasdaq 100

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Nasdaq 100 Profunds are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ultra Nasdaq-100 showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pharmaceuticals Ultrasector and Ultra Nasdaq-100

The main advantage of trading using opposite Pharmaceuticals Ultrasector and Ultra Nasdaq-100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pharmaceuticals Ultrasector position performs unexpectedly, Ultra Nasdaq-100 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 Nasdaq-100 will offset losses from the drop in Ultra Nasdaq-100's long position.

The idea behind Pharmaceuticals Ultrasector Profund and Ultra Nasdaq 100 Profunds 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.