Correlation Between UPP and ULT

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

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

Diversification Opportunities for UPP and ULT

-0.72

Correlation Coefficient

UPP  ULT

Pay attention - limited upside

The 3 months correlation between UPP and ULT is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding UPP and ULT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ULT and UPP 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 UPP are associated (or correlated) with ULT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ULT has no effect on the direction of UPP i.e., UPP and ULT go up and down completely randomly.

Pair Corralation between UPP and ULT

If you would invest  0.45  in ULT on January 20, 2024 and sell it today you would earn a total of  0.00  from holding ULT or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	4.55%
Values	Daily Returns

UPP  vs.  ULT

UPP

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UPP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, UPP exhibited solid returns over the last few months and may actually be approaching a breakup point.

ULT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ULT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ULT is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with UPP and ULT

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

The idea behind UPP and ULT 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 Commodity Directory module to find actively traded commodities issued by global exchanges.