Correlation Between Short Small-cap and Ultra Nasdaq-100

Can any of the company-specific risk be diversified away by investing in both Short Small-cap 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 Short Small-cap 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 Short Small Cap Profund and Ultra Nasdaq 100 Profunds, you can compare the effects of market volatilities on Short Small-cap 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 Short Small-cap with a short position of Ultra Nasdaq-100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Small-cap and Ultra Nasdaq-100.

Diversification Opportunities for Short Small-cap and Ultra Nasdaq-100

-0.98

Correlation Coefficient

Short Small-cap  Ultra Nasdaq-100

Pay attention - limited upside

The 3 months correlation between Short and Ultra is -0.98. Overlapping area represents the amount of risk that can be diversified away by holding Short Small Cap Profund 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 Short Small-cap 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 Short Small Cap 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 Short Small-cap i.e., Short Small-cap and Ultra Nasdaq-100 go up and down completely randomly.

Pair Corralation between Short Small-cap and Ultra Nasdaq-100

Assuming the 90 days horizon Short Small Cap Profund is expected to under-perform the Ultra Nasdaq-100. But the mutual fund apears to be less risky and, when comparing its historical volatility, Short Small Cap Profund is 2.35 times less risky than Ultra Nasdaq-100. The mutual fund trades about -0.37 of its potential returns per unit of risk. The Ultra Nasdaq 100 Profunds is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  8,301  in Ultra Nasdaq 100 Profunds on February 9, 2025 and sell it today you would earn a total of  1,533  from holding Ultra Nasdaq 100 Profunds or generate 18.47% return on investment over 90 days.

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

Short Small Cap Profund  vs.  Ultra Nasdaq 100 Profunds

Short Small Cap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Short Small Cap Profund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Short Small-cap may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Ultra Nasdaq 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultra Nasdaq 100 Profunds has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in June 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Short Small-cap and Ultra Nasdaq-100

The main advantage of trading using opposite Short Small-cap and Ultra Nasdaq-100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Small-cap 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 Short Small Cap 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.