Correlation Between Utilities Ultrasector and Vanguard Small

Can any of the company-specific risk be diversified away by investing in both Utilities Ultrasector and Vanguard Small 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 Vanguard Small 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 Vanguard Small Cap Value, you can compare the effects of market volatilities on Utilities Ultrasector and Vanguard Small 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 Vanguard Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Utilities Ultrasector and Vanguard Small.

Diversification Opportunities for Utilities Ultrasector and Vanguard Small

0.14

Correlation Coefficient

Utilities Ultrasector  Vanguard Small

Average diversification

The 3 months correlation between Utilities and Vanguard is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Utilities Ultrasector Profund and Vanguard Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap 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 Vanguard Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Utilities Ultrasector i.e., Utilities Ultrasector and Vanguard Small go up and down completely randomly.

Pair Corralation between Utilities Ultrasector and Vanguard Small

Assuming the 90 days horizon Utilities Ultrasector Profund is expected to under-perform the Vanguard Small. In addition to that, Utilities Ultrasector is 1.49 times more volatile than Vanguard Small Cap Value. It trades about -0.08 of its total potential returns per unit of risk. Vanguard Small Cap Value is currently generating about 0.01 per unit of volatility. If you would invest  4,817  in Vanguard Small Cap Value on September 28, 2024 and sell it today you would earn a total of  2.00  from holding Vanguard Small Cap Value or generate 0.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Utilities Ultrasector Profund  vs.  Vanguard Small Cap Value

Utilities Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Small Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Small 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 Vanguard Small

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

The idea behind Utilities Ultrasector Profund and Vanguard Small Cap Value 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.